Tips for Getting a Loan to Purchase Land
People purchase land for several reasons in India. Many people prefer to buy land for investment purposes. Usually, the price of a piece of land rises with time. For the same reason, people love to invest in land and boost their financial situation. However, one may not have ample funds to purchase land at the moment. There are circumstances where an individual comes across a beautiful piece of land but cannot buy it due to a shortage of funds. In such a case, individuals can apply for a loan and purchase a piece of land. Read on to know some tips to get a loan for purchasing land.
Understanding loans for purchasing land
Some people confuse a loan for land purchase with a home loan. Home loans are offered for purchasing constructed homes. Home loans are also provided for a house under construction in India. However, you can’t apply for a home loan if you only buy land with no intention of immediate construction. Financial institutions offer separate loans to individuals for purchasing land. Similar to other loans, a loan for land purchase is repaid within the given tenure. Usually, the term for a loan for buying land is shorter than other loan types. Usually, the tenure of a loan for purchasing land ranges between two and five years.
Many people acquire a loan for purchasing land and increase its tenure by converting it into a construction loan. After purchasing land on loan, individuals can begin construction and increase the loan tenure. Also, an individual will get some more funds from the bank to start construction on their land. Banks in India are hesitant to give out loans for purchasing land. For the same reason, they indulge in risk analysis before offering a loan for purchasing land. However, individuals can boost their chances of getting a loan for buying land with some healthy practices.
Tips to boost chances of getting a loan for purchasing land
Some ways one can boost their chances of getting a loan for purchasing land in India are as follows:
Banks evaluate an individual’s credit/CIBIL score before approving a loan for purchasing land. If your credit score is less than 700/650, there are low chances of loan approval. In India, a credit score of more than 750 is perfect for getting a loan for purchasing land. CIBIL score improves when someone takes loans and repays them timely, over a period. Therefore, banks prefer individuals with good credit scores as they are likely to return the loan amount timely.
The ratio between the debt and income of the loan applicant
Banks calculate the ratio between the monthly/annual debt and the applicant’s income before approving the loan application. One can use an online home loan calculator India to know their debt-to-income ratio. Banks do not offer loans to individuals that have more debt than income. If an individual has debt, there is a greater risk associated with repayment. Most banks approve loan applications of individuals with a debt-to-income ratio of 40% or lower.
Smaller land purchase loan amount
Sometimes, banks might not approve a vast loan for purchasing land. However, banks may authorise a small loan for land purchase to reduce the risk exposure. Therefore, individuals should try to save a higher down-payment amount to purchase a piece of land. The remaining amount for buying land can be obtained via a loan.
Individuals shouldn’t let go of an opportunity to buy a piece of land. With PNB Housing, individuals can get loans for purchasing land at lower interest rates. Apply for a loan and purchase the dreamland today!