How is LRD different from a traditional loan against property?
- Posted: 18th June, 2025
- Updated: 18th June, 2025
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Here are the main differences between Lease Rental Discounting (LRD) and Loan Against Property (LAP):
| Aspect | Lease Rental Discounting (LRD) | Loan Against Property (LAP) |
|---|---|---|
| Definition | LRD is typically a loan offered against the rental income generated from a leased property. | LAP is usually a loan taken against the value of a property, regardless of rental income. |
| Eligibility | Applicants generally need a valid lease agreement with a tenant and consistent rental income. | It is typically assessed based on their overall income and the property’s market value. |
| Loan Amount | The loan amount is typically determined based on the rental income and the duration of the lease agreement. | The loan amount is generally based on the property’s market value, usually up to 60-80% of the value. |
| Interest Rates | Interest rates are generally linked to the rental income potential and lease agreement tenure. | Interest rates are typically determined based on the applicant’s profile and loan-to-value ratio. |
| Tenure | Loan tenure is usually aligned with the lease agreement period, generally shorter (e.g., 7-15 years). | Loan tenure can be longer, typically up to 20 years or more, depending on the property type and applicant's profile. |
| Risk Factors | Loan providers usually focus on the risk of tenant default or lease termination during the loan tenure. | Risks are generally tied to fluctuations in property value or the applicant's inability to repay due to income changes. |
| Prepayment Flexibility | Prepayment is typically allowed, often subject to certain conditions and charges. | Prepayment is usually available, with conditions and charges varying by lender. |
| Use of Funds | Funds are generally utilised for business expansions, investments, or other planned purposes linked to the rental property. | Funds can typically be used for a wide range of purposes, including personal or business needs. |
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