If you`re in need of financial assistance, but don`t have any assets to pledge as collateral, then a Loan Against Rent Agreement (LARA) could be a viable option for you. LARA is a type of loan that enables you to borrow money against future rental income from a property that you own, without having to put up any other assets as collateral.
A LARA is essentially an agreement between you and the lender, in which the lender provides you with a loan based on the rental income generated by your property. The lender holds the rental income as security during the course of the loan, and you continue to receive the rental income during this period. Once the loan is repaid with interest, the lender releases the rental income back to you.
LARAs are typically provided by banks, financial institutions and non-banking finance companies (NBFCs) in India. The eligibility criteria for LARAs vary from lender to lender, but generally, you need to own a property that generates a regular rental income. Lenders typically offer loans of up to 70% of the net monthly rental income from the property, with loan tenures ranging from 1 to 10 years.
One of the benefits of LARAs is that they are relatively easy to obtain, as compared to other forms of loans. The documentation required is minimal, and there is no need for a physical collateral. Additionally, the interest rates on LARAs are usually lower than those on unsecured personal loans, as the loan is secured against the rental income generated by the property.
However, it`s important to note that LARAs are not without their risks. If you default on the loan, the lender can take possession of the rental income generated by the property. This could put you in a precarious financial situation, as the rental income could be your only source of income. Additionally, if the rental income from the property is irregular, the lender may be hesitant to provide you with a LARA.
In conclusion, a Loan Against Rent Agreement is a viable option for those in need of financial assistance, but without any assets to pledge as collateral. However, it`s important to weigh the risks and benefits before taking on a LARA, and to ensure that you have a solid plan in place for repaying the loan. As with any financial decision, it`s best to consult with a financial advisor before taking the plunge.