Getting a loan against rental income is not common but can be a very effective step to leverage an income stream of property owners. Nowadays many people have a second dwelling unit in the form of either a flat or a house and if that is on rent, its income could be utilised to guarantee a loan from banks or non-banking financial companies (NBFCs). If the apartment is rented out to established companies, which pay rent to the bank account of the property owner, securing a loan becomes all the easier.
Retain ownership of property
It can be of great use since such loans allow the owner to retain full ownership of the property and unlock its value for the owner. There are a few conditions that one needs to fulfil to secure a loan against a rental cash flow. The first is that the property must be owned by the borrower. If the rent has been flowing in for some years in a stable manner, it helps the lender in decision making.
Sound credit score
Whatever the other parameters, there is nothing to substitute a sound credit score of the applicant. The closer your credit score is to 900, the more your chances of securing a relatively low interest rate that you have to service. A good credit score is treated as sacrosanct by all lending institutions, whether a bank or an NBFC.
Ownership and rent documents
The bank/NBFC would need all the relevant documents to process the loan application. These would typically be documents to establish your clear ownership of the property, rental agreements, bank account statement to prove the cash flow from rent, IT returns and KYC documents such as PAN, Aadhaar Card and address proofs.
Both commercial and residential property
If the property that you own is a commercial property, clinching a loan becomes very easy. However, if the property is a residential one, it is also considered for a loan against the rent that it generates every month.
Any loan that is taken against a property or an income stream is likely to have a lower interest rate than an unsecured loan. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
