If you own property and need funds — to expand a business, consolidate debt or meet a large expense — two of the most common options are a loan against property (LAP) and lease rental discounting (LRD). Both are secured loans, both let you keep the property, and both are offered by banks, NBFCs and financial institutions. They are assessed in very different ways, though, and that decides which one suits you.
What is a loan against property?
A loan against property is a secured loan where you mortgage a residential, commercial or industrial property you own to raise funds. You continue to own the property and, in most cases, keep using it.
Lenders look mainly at your repayment capacity — your income, existing obligations and credit history — and at the property's value and title. The funds can be used for almost any legitimate purpose: business expansion, working capital, debt consolidation, education or medical expenses, and other personal needs.
What is lease rental discounting?
Lease rental discounting is a loan against the future rental income from a property that is already leased — typically an office, a shop or retail space, a shopping complex, a warehouse or an industrial property.
Here the lender relies mainly on the lease and the tenant: how much rent is payable, how long the lease runs and how dependable the tenant is. The rent is usually directed towards repaying the loan, so the property effectively pays for the funds you raise.
LAP and LRD side by side
| Compared on | Loan against property | Lease rental discounting |
|---|---|---|
| Main basis of assessment | Your income, credit profile and the property's value | Rental income from an existing lease |
| Property | Residential, commercial or industrial | Leased commercial property |
| Typical borrower | Individuals, professionals and business owners | Owners of leased offices, shops, malls, warehouses and industrial units |
| How it is repaid | From your income or business cash flows | Largely from the rent paid by tenants |
| What matters most | Repayment capacity, credit history, clear title | Lease terms, tenant quality, remaining lease period |
| Ownership | Stays with you | Stays with you |
When a loan against property makes more sense
- The property is self-occupied or vacant, so there is no rental income to borrow against.
- The property is residential, which LRD generally does not cover.
- Your income and credit profile are strong, and you want the flexibility to use the funds for any purpose.
When lease rental discounting makes more sense
- You own a commercial property leased to a dependable tenant with a reasonably long lease.
- You would rather the rent services the loan than your own income or business cash flow.
- You want to unlock the value of a rent-earning asset without selling it.
What lenders typically look at
For both products, lenders check that the property's title is clear and value it independently. For a LAP they will also assess your income documents, bank statements and credit history. For LRD they focus on the registered lease or leave-and-licence agreement, the tenant's profile, the rent actually being received and how much of the lease period remains.
Exact eligibility, loan amounts, interest rates and tenures differ between lenders, which is why comparing more than one lender usually pays off.
How Biz Corp Solutions helps
We help individuals, professionals, business owners and commercial property owners compare LAP and LRD options across banks, NBFCs and financial institutions. We help structure the facility, prepare the documentation and keep you updated on your file from submission to approval. Learn more about our loan against property and lease rental discounting services.