6 things to keep in mind before applying for a land purchase loan
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6 things to keep in mind before applying for a land purchase loan

  • Highlights

  • Acquiring a plot of land is an expensive step to owning a home

  • Location and land type are vital aspects to consider

  • A plot loan has a higher interest rate compared to home loans

  • Lenders feel secure when giving loans for residential purposes

For many, owning their own home is one of the biggest milestones in their life. Acquiring a plot of land is often the first and most expensive step to this. Due to exorbitant land prices, most people require a loan to purchase land. Since the land appreciation rate is often higher than plot loan interest rates, buying a plot of land with a loan is an economically viable option. Availing such a loan has become even easier with Bajaj Finserv’s pre-approved offers. Share a few details and get your pre-approved loan.

However, before applying for such a loan, you need to consider many factors. These include:

1. Type of land you want to purchase

One of the most important things to consider is the type of land you want to purchase. You must know whether you want it for your primary residence, for agriculture, or as an industrial plot before you apply for a loan. Plot loans are generally available only for land to be used for residential purposes.

2. Location

Another factor to take in to account is the geographic limitation of plot loans. Your plot loan will only let you buy plots located within a particular municipality or corporation. Thus, you will not be able to purchase areas located in other villages or on even on city borders with a loan.

3. Tenor

While home loans can stretch for a tenor of up to 30 years, plot loans can be availed only for anything between 15-20 years. Choose your tenor carefully after considering your plans and repayment capabilities.

4. Rate of interest

While home loans can stretch for a tenor of up to 30 years, plot loans can be availed only for anything between 15-20 years. Choose your tenor carefully after considering your plans and repayment capabilities.

5. Purpose of purchase

Before purchasing a piece of land, know the use that you are going to put it to. Know whether you want to build your own home, a residential complex, or use it as an investment for future resale. Building on a purchased piece of land attracts a lower rate of interest, as doing so provides the lender a sense of security.

6. Lender’s risk

Before approving any loan, lenders consider several factors to determine the risk profile of a loan application. These factors include, the purpose of land purchase (investment or self-use), construction timeline (a shorter timeline is less risky for the lender), and existing loans.

Keep these factors in mind when you go looking for a loan to fund your own plot of land.

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