What are Rental Loans?
Rental Loans are a type of finance offered to prospective landlords who need help buying properties for investment purposes. This type of loan has been introduced to make up for the gap between those who can afford to buy their properties and those who cannot and make it more feasible for people with potentially poor credit histories or no credit history at all.
How do You Qualify for a Rental Loan?
Qualifying for these types of loans is quite simple. Applicants must have an appropriate income to qualify for this type of loan. Renting out properties also earns a rental income, which will be used to pay off the finance. In addition, applicants must secure enough cash in their accounts to cover the agreed loan amount.
Best Lenders for Rental Loans.
Most lenders, including banks, offer these types of loans. However, it is essential to note that not all will be open to providing this type of loan. Some only offer certain products based on the applicant’s qualifications and characteristics. For example, some may only lend to applicants who already own a property to rent and use as collateral. In contrast, others may lend only to applicants who already have a place of residence with their name on the title deeds.
Common Examples of Rental Loans.
There are two types of rental loans: secured and unsecured. An unsecured loan is a credit offered without collateral, usually at a higher interest rate than that charged for a secured loan. A secured loan is a credit offered based on assets held as collateral.
Advantages of Rental Loans.
- The interest rates charged on a rental loan are usually much lower than those charged by other types of lending.
- The borrowing period is often longer, which gives the borrower more time to repay the loan.
- The property used as collateral can be rented out and generate income for the borrower to help them pay off their loan faster.
- Borrowers can hire their estate agents to market their rental property, thereby keeping all rental income for themselves.
- The interest rates charged on a rental loan are higher than those charged by other types of loans.
- If a borrower loses their job and cannot pay the mortgage, they risk losing their properties.