One of the primary and categorically cumbersome aspects of relocating to a different region is the initial cost associated with it. It becomes all the more financially burdensome when migrating to a Tier I city.
These cities are characterised by their flourishing economic growth and a high standard of living. Naturally, individuals flocking to these regions need to take into consideration high rent and security deposits before relocating. To meet such expenses, an individual might consider paying it at a go from their savings or rely on a rental deposit loan.
While paying it off from your savings is an option, such a credit facility helps mitigate the initial expenses associated with relocating. It thus helps avoid being in dire straits in one’s initial months of availing a new accommodation due to drained savings.
Breakdown of accommodation costs in Tier I cities
Here’s an analysis of the accommodation expenses in a few Tier I cities.
- Bangalore
Average monthly rent for 3 BHK flats – Rs.35,000.
Average monthly rent for 2 BHK flats – Rs.20,000.
Security deposit – Equivalent to 8 to 10 months’ rent.
- Mumbai
Average monthly rent for 3 BHK flats – Rs.75,000.
Average monthly rent for 2 BHK flats – Rs.40,000.
Security deposit – Equivalent to 4 to 5 months’ rent.
- Chennai
Average monthly rent for 3 BHK flats – Rs.30,000.
Average monthly rent for 2 BHK flats – Rs.20,000.
Security deposit – Equivalent to 7 to 8 months’ rent.
- Pune
Average monthly rent for 3 BHK flats – Rs.35,000.
Average monthly rent for 2 BHK flats – Rs.25,000.
Security deposit – Equivalent to 2 to 3 months’ rent.
What are the benefits of a rental deposit loan?
A rental or security deposit loan compliments one’s finances and eases the burden off an individual requiring paying off high-value deposits when moving into new accommodation. The following benefits thus ensue.
- Ability to meet high relocation costs
Cities like Bengaluru, Mumbai, etc. witness a massive influx of migrators every year owing to their continuous sectoral and economic growth.
For instance, Bangalore witnessed a 3.74% growth in its population in 2019. And a growing population concentrated in a particular region engenders an accommodation crisis, thus shooting up associated costs like high-value security deposits. This amount acts as insurance for the landlord in case a tenant defects on the rental agreement.
In addition to rental deposits, other associative expenses such as advance rent, brokerage costs, furnishing, etc. can take up the total cost of moving into a new apartment to Rs.3 – 3.5 lakh on an average. Financial institutions offer Rental Deposit Loan of up to Rs.5 lakh that can be utilised to meet high relocation costs sufficiently.
- Flexible repayment of the loan amount
Repayment tenure for a security deposit loan stretches up to 3 years or 36 months. It thus allows you to repay the loan conveniently without imposing any significant financial burden.
Note that when opting for a longer tenor, your EMIs would be low, but interest outgo would be more as compared to a shorter tenor.
Determine the repayment tenor that agrees with your income and financial standing while leaving room for other financial obligations.
- Minimal documentation to avail loan
Financial institutions such as Bajaj Finserv require borrowers to complete a minimal documentation process for loan approval. It is aimed to convenience customers by minimising the hassle involved with availing a loan, especially when already burdened with locking in on an apartment.
You need to submit only a handful of necessary documents along with a duly filled rental deposit loan application form to conclude documentation for such a credit facility.
- Faster loan processing
Another significant advantage of security deposit loans is a quicker application and advance processing. It thus ensures that you would not need to wait for a prolonged period to confirm your tenancy to a landlord.
- Hassle-free part-prepayment facility
With a rental deposit loan, borrowers enjoy the facility of part-prepayment at no extra charge. It allows individuals to reduce the repayment tenor or EMIs, thus restricting the overall interest outgo and maximising benefits.
In case you find yourself in a comfortable financial position, you can choose to pay a portion of your loan in advance.
These are a few reasons why you might consider a rental deposit loan as a viable funding option for your relocation instead of draining your savings. Choose a suitable loan amount and utilise an EMI calculator to estimate monthly outgo for improved financial management.
