Lease Rent Discounting
Lease Rent Discount is another method to obtain finance from bank or other lending institutes.
- Lease Rent Discount is another method to obtain finance from bank or other lending institutes. Lease Rent Discount (LRD) consideration is between the borrower who owns the premises, the tenant who has rented the said premises or taken on lease and the bank or financial institute or Corporate. The rent is considered as fixed income over a stipulated time i.e. lease or rent period or tenure.
- The agreement is between the borrower and lender and the major term of repayment is the rent is directly deposited with the lender and not with the borrower. The Borrower is sanctioned a loan based upon the rent to be collected over the period of lease.
- Lease rental discounting is a great way to generate funds from owned assets and use them for further investments.
- Under Lease rental discounting, the borrower avails a loan by pledging the future rental income to the lender. In this way the borrower can get money upfront in lieu of the rental income which would come to him over a period of time.
- This product is typically useful for people who have significant rental incomes but at the same time may not be able to leverage their property directly and avail a loan against it. This could be because the property may already have a loan against it.
- One does need to remember that only 75-80% of the value of the rental income for the remaining lease period is what the user can expect to avail as a loan amount. The tenure or duration of such loans is much shorter than other property based loans and usually linked to the amount of time remaining for the lease on the property to expire.
- Most institutions discount upto 90% of the value of the remaining lease, provided the borrower can demonstrate the ability to pay the installment for such a loan.
