How the rental deposit loan works

May 30, 2023 . Home Buyer's Guide . 10 min read
rental deposit

The rental deposit is the security deposit that the tenant pays to the landlord when they rent an apartment or a house. It is a safety net for the landlord and once they have received the rental deposit amount from the tenant, they can stop looking for alternative tenants. How much rent deposit the tenant pays depends on the lease agreement. It can be one month, six months, or even 11 months.

Paying 11 months of loans in one payment can be financially taxing for many. When tenants pay a very high rental deposit, they often opt for a rental deposit loan.

What is a rental deposit loan?

As introduced above, sometimes the advance rent that the renter needs to pay before they can rent a house or an apartment can be quite high. In most cases, the advance payment is for a couple of months. Some landlords insist on getting an advance payment for a longer stretch and consequently, it can become difficult to pay. To meet such a big expense in one go, you can get a rental deposit loan.

Rental deposit loans are provided by creditors specifically to meet the financial requirements of a rental security deposit.

Why do people take a rental deposit loan?

People rent a home for different reasons. Maybe right now they cannot invest in a house of their own or they need a temporary residence for a few years. Maybe they have just moved to a new city after getting a job and they need a house for the family. The reasons can be different.

A rental deposit provides monetary security to the landlord. They no longer need to look for a new tenant. The deposit also acts as a safety net in case the tenant damages the apartment or violates the lease agreement. For example, if the tenant moves before the lease expires, the landlord is assured of the complete amount accrued through the lease.

When the lease expires and the tenant chooses to vacate the property, the rental deposit is reimbursed after deducting charges for repairs and restoration. Also, in case the tenant defaults on paying the monthly rent, the landlord can deduct the same amount from the security deposit on a pro-rated basis.

What are the benefits of taking a rental deposit loan?

People don’t take a rental deposit loan just to meet the requirements. Suppose, your monthly rent is ₹ 15000 and you need to pay rent for 11 months, that is, ₹ 165000. You don’t need to take a loan for the exact amount of ₹ 165000. You can take a loan of ₹ 200000 or even ₹ 250000. Why?

There are many expenses to be met when you move to a new place.  You will need to pay to movers and packers, and it can be a bit expensive especially when you are moving from another city. You may need to buy new kitchen utensils or electronic appliances. New fittings and furnishing may be required. A new gas connection. A new kitchen chimney. New faucets in the bathroom. There can be many more unforeseen expenses. All these expenses can be clubbed together when you are taking a loan. Taking the loan ensures that your move to a new rented house is comfortable, convenient, and financially not taxing.

How much rental deposit loan can you get?

The quantum of the loan depends on the requirement of the tenant, the borrower’s eligibility, the lease agreement’s terms and conditions, and also on the lender’s policy. It mostly ranges between ₹ 1,00,000 to ₹ 10,00,000, based on the lender. Why such a wide range for a rental deposit loan?

As mentioned above, some landlords demand an advance payment for a period ranging from 8 – 11 months based on the state the property is located in and the tenure of the tenancy.

Nonetheless, how much rental deposit loan the tenant can get depends on the lender the tenant approaches.

Since the tenant will be paying interest, it is advised that one shouldn’t go overboard while getting the loan. The tenant should get enough loan that covers the deposit for the agreed-upon period, and some associated expenses. In most cases, the full amount is reimbursed by the landlord.

What is the process of getting a rental deposit loan?

The rental deposit loan falls in the category of an unsecured loan. Unsecured loans don’t require collateral. This means a tenant doesn’t need a property or a vehicle to get a loan. Though, the lender must have an acceptable credit rating.

The process of getting these types of loans is quite simple. Since its primary benefit lies in the fact that it can be obtained conveniently, the process is purposely kept as simple as possible. The lender can log onto the creditor’s website and submit an online application. Necessary documents will be required such as:

  • Photo ID proof
  • Permanent residence proof
  • ID proof such as an Aadhaar card
  • Recent bank statement
  • Salary slip
  • Employment proof

Once the documents are processed and validated, the loan amount is transferred to the borrower’s or landlord’s bank account(based on the lender’s policy) within 24 hours.


Getting a rental deposit loan is a convenient way of arranging money without putting much burden on one’s finances. Paying it in a lump sum can be a lot of money, especially for professionals who have just started earning or have just landed a new job. In most cases, these loans are quite affordable and one should certainly avail one to meet not just the rental deposit-related expenses, but also to meet moving-related expenses.

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