Personal Loan

Plot Loan or Personal Loan: Which is the better option for buying land?

3 min read

Apr 30, 2024

3.1k Views

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.