Purchasing a plot of land is like an investment. However, it is rather difficult to make this investment these days as land has become a scarce commodity in India. The prices are rising heavily urging you to take a loan for land purchase.
Buying a land loan requires planning. If you planning to build your first home by purchasing a piece of land, it is advisable to be very cautious and thorough.
There are certain factors you should consider before applying for Land Loans. Let us have a look at five key factors to consider before applying for a land loan:
1. Purpose of Buying the Land
There can be several purposes for buying a land:
- Building your own house
- Building a residential complex
- Investment purpose
- Re-sale purpose
The price of the loan will vary as per the above-mentioned factors. You can get a better loan offer with a lower rate of interest if you build your own house.
2. Types of Land
Land can be of different types depending on its use.
- Residential plot
- Commercial land
- Agricultural land
- Land used for recreation
- Land used for transportation
You can apply for a land loan only if you are using the land for residential purpose.
3. Geographical Factor
There is always a geographical limitation on plots. This means you’re your land loan will cover only those plots of land which fall under the respective municipality or corporation. Hence, you must consider this factor while buying a land and applying for a land loan.
4. The Interest Rate on a Land Loan
The interest rate on land loans is generally on the higher side. Banks usually do not negotiate on the interest rates. There are two types of interest rates on land loan:
- Fixed rate of interest
- Floating rate of interest
You should always go for a fixed rate of interest as the land prices are ever-increasing. If you go for a fixed rate, you will not have to pay a higher interest amount even if the land and the land loan prices increase.
5. Duration of the Loan
The maximum tenure of land loans is generally 15-20 years. According to your convenience, you can choose the duration of the loan. If you want to pay off the loan quickly, you can opt for a shorter duration. If you are planning to buy another loan in future for your children or parents like education loan or senior citizens’ loan, then you can opt for a longer duration for ease of interest payments.
The Bottom Line
Looking at the increasing land prices, it is advisable that you apply for a land loan online after comparing all deals to help you make a good decision.