Lease Rental Discounting Explained

Overview

Do you own a property and need financial flexibility? Many corporate entities and individuals earn a notable portion of their income from rents they receive by letting their property People have different financing needs if compared with each other, and also differ in resources; after identification of this need, the lending institution offers a separate loan/credit facility

To meet the specific credit needs of landlords and tenants, products like Lease Rental Discounting (LRD) are created. The income received after letting the property can be used to raise the term loan; LRD works on the premise that leased property must derive a fixed amount of rent - which one can use as collateral to generate funds.

One can assure a Lease Rental Discounting (LRD) using OneNDF at a lower interest rate and can avail of it based on future rentals - Stay tuned and know all about LRD today with us!

What is Lease Rental Discounting?

Lease rental discounting is considered as payments that one will receive in future; that future money will help you acquire a loan using your rental receipts as collateral today. Using the LRD option, one can unlock the hidden potential of their assets. The rental cash flows must be sufficient and should be in order. Also, LRD does not secure the property; hence no need to mortgage one.

In LRD, banks inspect the long-term cash flow and provide loans based on the exact amount, and the loan is sanctioned based on the rent promised.

Parties Involved in Lease Rental Discounting!

The agreement is signed between three parties, the borrower and the lender sign the standard agreement, and the tenant also signs an agreement with the bank that is required to make rental payments directly to banks and not to the loan taker.

How Does Lease Rental Discounting Work?

Lease Rental discounting works based on income received from the rental properties, a situation where the tenant enters into the lease with the premise owner; the signed

agreement between the tenant and property owners regulates the monthly payable rent. The property owner uses those rental receipts for the duration as collateral/security.

The rent amount is directly transferred to the bank as EMI and does not go to the property owner. Every lending institution has different criteria regarding the loan amount; on average, upto 75% of property valuation is the loan amount sanctioned.

(LRD is the profitable financial alternative if you are looking to meet your short-term financial need)

Benefits of Lease Rental Discounting (LRD)

LRD has a countable number of benefits which are stated below

Competitive Rate of Interest

The lender extends the LRD on rented properties; the returns are a bit high; hence businesses can secure loans at competitive interest rates.

Extra Use of the same property

LRD - a financial product that allows property owners to make dual use of their premises. Business owners / Entrepreneurs have a chance to secure loans against income from their property while using the property at the same time. Simultaneously, they secure a rental cash flow to acquire another loan and boost their liquidity

Bank will charge from rent received.

Once you enter into an LRD agreement, there is no need to worry about timely EMI payments; banks will directly auto-deduct from your Escrow account against loan repayment.

Multipurpose Loan

One can use LRD funds to fulfil various credit needs, whether for Business expansion, managing your child's education, or financing a wedding.

Quick Disbursal of the amount

Lease Rental Discounting is easy using OneNDF, as the process is simple and fully transparent; all can be done without being physically present. At OneNDF, they follow three easy steps, ensuring 5x faster loan execution and fulfilment.

Why Lease Rental Discounting?

As LRD is a multipurpose loan, the funds can be used for productive purposes like

Business Expansion

Loan against rent receivable can turn out to be a significant measure if looking to expand your business; property owners can use their funds and grow their business of any kind; this proves as an additional income using the existing property and a notable advantage to meet business needs without twisting finances.

Purchase new property

For those people who are looking to purchase new premises, then LRD is an attractive financing option - whose primary income source is rental. Lessors can purchase new premises using these funds.

The existing property becomes a source of loan repayment, and one does not have to pay timely EMIs from pocket.

Who frequently acquires LRD?

The following borrowers use LRD on the most frequent basis.

● High Net Worth Investors

● Commercial Property Developers

● Real Estate Investment Trusts

Documentation required for LRD loan!

The documents required must be submitted to the lending institution to process the loan application.

● KYC Documents

● Bank Statements

● Loan Documents

● Property Documents

● Income Documents

Eligibility: Lease Rental Discounting

Banks / NBFCs have their eligibility criteria to follow before sanctioning LDR loans. The standard criteria set by lending institutions are

● Age - Minimum 21 years and maximum 60 for salaried / 65 for self-employed

● Period of Lease - Varies from lender to lender, availed for a maximum of 15 years

● CIBIL score - Credit score plays a crucial role in any kind of loan; banks ask for a minimum of at least 700 scores before approving your application.

● Other income sources - before allocating, LRD institutions have a quick background check on your income sources and whether you can repay the loan if the tenant vacates.

Conclusion

On a closing note, LRD is the prominent leveraging strategy that enhances the portfolio of one; if you have your own premise, then you can use the rent receipts as collateral and acquire a new loan on that basis. Big companies are active customers of LRD financing; one can use the loan money for any desired purpose.

Lease Rental Discounting: Frequently Asked Questions

Q.1 How is Lease Rental Discounting calculated?

LRD loan amount is based on the existing value of the property and the discounted value of rentals.

Q.2 Is LRD a term loan?

Yes, LRD is referred as a Term loan.

Q.3 What is the margin for lease rental discounting?

The margin in LRD is up to 100 per cent.

Q.4 Which bank is best for LRD loans?

● PNB Housing LRD Loan

● Bajaj Finserv LRD Loan

● Axis Bank LRD Loan

● ICICI Bank LRD Loan

Turn static files into dynamic content formats.

Create a flipbook