Even if one owns a house, one may be keen on purchasing a plot of land – for either retirement or as an investment or any other purpose. Purchasing land in a metro might be next to impossible, however one always nurses the idea of purchasing land in one’s native village or in the outskirts of one’s city.
However. buying a piece of land can be an arduous job. Considering their rates, it may not be possible for a large section of the population to afford them with their savings alone. Therefore getting a loan for buying a plot is a viable option to go for. Before you set out to look for a loan to buy a plot, there are a few things that you should keep in mind.
Things to be aware of before taking a loan
Knowing about these few simple things on the plot loan will let you have an upper hand on it. It will simplify your decision-making process and make sure you have the best deal in hand.
Compare Interest rates
Plot loans are offered by multiple financial institutions at variable interest rates. Investing some time in comparing the interest rates charged by different lenders will help you pick the most lucrative one out of them. Even a slightly lower interest rate can save a lot of your money on interest payments, enhancing your savings.
Check your eligibility
Make sure to check your eligibility before applying for a plot loan. This can save a lot of your time by ensuring that your application does not get rejected in the verification process later on. You can use a plot loan eligibility calculator to know your eligibility.
Max out on LTV
Loan to value ratio or, LTV in short, defines the maximum loan amount that you can disburse out of the applied plot loan scheme. Generally, you can get up to 70% of the agreement value for an independent land and 75% for the ones in a gated community but the figures are subject to change depending on lenders. Hence, look for the schemes offering the highest LTV.
Select the tenure wisely
The interest rates and EMI values of your plot loan are going to be decided based on your tenure. Generally, plot loans can be extended to a tenure of 15 to 20 months. Make sure that the selected tenure does not overburden you with the EMI values.
Look for the construction timeline
Some plot loans come with an additional condition, compelling you to start construction on the plot within a predefined timeline. If you are not ready for that, do not pick such loan schemes. Go for a loan scheme with no such condition instead.
Type of land that can be funded
Generally, stretches of land with commercial or residential transformation can be funded out of a plot loan. Agriculture and some other types of land are not usually funded by general lenders.
Plots offering optimum benefits
It is usually recommended to select plots in gated communities to avoid the possibility of intrusion and take advantage of the pre-laid roads, water supply lines, etc. which you might not get in an isolated land.
Determine the purpose of purchase
Set your mind beforehand if you want to use the plot for personal use or as an investment. In case it is the latter, lenders might question you a bit about your plans to evaluate your determination in investment.
With land prices skyrocketing over the last few years, now may be a good idea for you to consider purchasing that plot of land you always dreamt about.
