Personal Loan For Land Purchase: Key factors to check opting for a land purchase loan

Purchasing land is a big financial decision. Whether to build a home, start a farm, or hold it as a long-term investment, land can serve various purposes. Before making this commitment, one crucial question arises: How will you finance the purchase?

For many buyers, the answer lies in taking out a land purchase loan. At this stage, it is important to understand that there are multiple loan options available, one of them being a personal loan.

While a personal loan can indeed be used to buy land, it is essential to weigh its advantages and disadvantages carefully.

Below, we explore the key implications of using a personal loan for a land purchase, helping you make an informed decision.

Understanding Personal Loans

A personal loan is an unsecured loan offered by banks, Non-Banking Financial Companies (NBFCs), and online lenders. Unlike secured loans, it does not require collateral. A personal loan can be used for funding any financial requirement, such as a wedding or travelling, as well as buying land.

While selecting a land purchase loan, it is important to compare the terms and conditions of different options to decide which offers the best value for money. On the Moneycontrol app and website, you can compare the personal loans offered by eight lenders. With interest rates starting at 10.5% annually, you can borrow up to Rs 50 lakhs. An online process ensures that the application process remains hassle-free.

Can You Use A Personal Loan To Buy Land?

Yes, you can use a personal loan to buy land in India. This is because such loans usually don’t come with any restrictions on how they can be used.

Advantages Of Using A Personal Loan For Land Purchase

No Requirement For Collateral
Personal loans are unsecured, which means you don’t need to provide any collateral like property or gold. This is helpful if you don’t have valuable assets to pledge or prefer not to risk them.

Flexibility
Since personal loans typically come with no usage restrictions, they offer the flexibility to purchase various types of land, be it agricultural or non-agricultural. If you only need to finance a small portion of the total cost, going for a personal loan could be a practical and convenient choice.

Minimal Documentation
Personal loans require much less documentation compared to secured loans. This may lead to faster processing of your loan application.

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Disadvantages Of Using A Personal Loan For Land Purchase

High Interest Rates
Since personal loans for land purchase are unsecured, they come with higher interest rates compared to secured loans. The higher interest rate on a personal loan can significantly increase the overall cost of purchasing land.

Lower Loan Amounts 
Personal loans may not be enough to buy expensive land. In India, they usually range from Rs 50,000 to Rs 50 lakhs, depending on the lender and your eligibility. So, they are better suited for buying smaller plots or covering part of the total cost.

Shorter Loan Tenure Leading To Higher EMIs
Personal loans usually have repayment tenures of one to seven years. In contrast, the tenure for plot loans or home loans can extend up to 15 to 20 years, making monthly EMIs more affordable. For a high-value purchase like land, a shorter tenure means higher monthly EMIs, which could strain your finances.

You can browse the websites of different financial institutions to check the loans they are offering. Another option is to use the Moneycontrol app to fill out an online application for a personal loan. On the application, you can get loans of up to Rs 50 lakhs, with interest starting from 10.5% per year. Once the loan application is verified and approved, the amount is credited to your bank account.

Conclusion

To conclude, while it is certainly possible to finance a land purchase with a personal loan, it is important to consider several factors such as interest rates, the loan amount you can get and the tenure for repayment to decide if it is the best method for you to finance your land purchase. If you want to buy a large plot of land, you must also consider options such as a plot loan.