Buying a plot of land allows you to invest your money now and possibly, enjoy the returns several years down the
line. You can use the land to build a house, grow agricultural produce or sell it later for a profit. The price
appreciation of a plot of a land is often much higher than that for a ready property, making the former a preferred
investment option for many.
If you don't have sufficient funds to buy land, you can get a Plot / Land Loan from your bank. You can also get a
Personal Loan for land purchase. Before you decide which loan to choose, you need to understand the differences
between these two options.
Plot Loan vs Personal Loan: What's different?
Can we get a loan for buying land? Yes, we can get a Personal Loan or a Plot Loan to buy land. Understand the key
differences between these two options through the following table –
|
Personal Loan |
Plot Loan |
Purpose |
It can be used for any purpose, like travelling, medical expenses and home repairs. You can also use
it to buy land. |
A Plot Loan is specifically given for buying a plot of land. |
Type of loan |
It can be secured or unsecured, depending on the lender. Generally, personal loan is an unsecured
form of loan. |
It is a secured
loan. The plot of land is used as the collateral. |
Loan amount |
You can borrow only a limited amount as Personal Loan. For example, Axis Bank provides a Personal
Loan for a maximum amount of ₹40 lakh. If you require more funds, a Personal Loan may not be as
helpful. |
The amount of the Land Loan is determined as a percentage of the market value of the plot. |
Duration |
The repayment duration of a Personal Loan is short. For instance, the tenure for Axis Bank Personal
Loans is between 1 and 7 years. |
Plot Loans have a longer repayment period. Depending on your lender, the repayment period could be
between 10 and 30 years. |
Pros and Cons of getting a Land Loan for buying land
Can I get a loan to buy land? Yes, you can get a Land Loan from your bank. However, the loan comes with some benefits
and drawbacks.
Pros
- Land Loans have a repayment period of 10 to 30 years. You get sufficient time to pay your dues if the loan
amount is high.
- Land Loans are secured loans. Secured loans have several benefits, such as lenient eligibility criteria, loan
amounts based on the asset's value, and lower interest rates than unsecured loans.
Cons
- You have to mortgage your plot of land to get a Land Loan.
- You may face problems like market fluctuations, lack of accurate data and legal disputes while valuing your plot
of land.
- The application process for this loan is lengthy because land valuation is time-consuming and a lot of paperwork
is involved.
Personal Loan: Pros and cons
Here are the benefits and drawbacks of using a Personal Loan for land
purchase.
Pros
- You can get a Personal Loan without keeping any asset as collateral.
- You can use the proceeds of your Personal Loan for any personal expense without restriction.
- Personal Loans generally require minimal documentation.
Cons
- You can get a Personal Loan for up to a limited amount only.
- Banks set strict eligibility requirements for Personal Loans to compensate for their risks.
Get a Personal Loan online from Axis Bank for up to ₹40 Lakh. The application process is fast and paperless. You need
to submit only a few documents to get the loan approved.
Also Read: Personal Loan vs Home
Loan: What is the difference?
Plot Loan vs Personal Loan: Final verdict
Plot Loan vs Personal Loan - which one should you choose? Well, the answer will be different for every situation. For
example, taking up a Personal Loan would be the better option if you already have your funds and only need to borrow
a small amount. However, you should apply for a Land Loan if you plan to buy a plot entirely from the loan proceeds.
Before making a decision, consider the required amount, repayment tenures and interest rates under both options.
Disclaimer: This article is for information purpose only. The views expressed in this article
are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd.
and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader
for taking any financial decisions based on the contents and information. Please consult your financial advisor
before making any financial decision.