One of the most important steps that have to be taken while investing in infrastructure for business growth and expansion is land acquisition. It can be a new manufacturing unit, retail store, or even a warehouse. The plot is the basic buy, but such an investment is huge in terms of money. And that's where a plot buying loan steps in.

In the article below, we break what this loan means and works for you, exactly when such loans will be suitable for your business. And for other tools, things like a balance transfer calculator are further facilitations of making your loan procedure more comfortable and efficient in processing.

What is a Loan to Purchase a Plot?

A plot loan is a secured form of a loan. Here, the land you are buying serves as a collateral and, therefore, such loan is provided by the banks and NBFCs and other financial institutes to you.

Main Attributes of Loans to Purchase a Plot

  • Secured Loan: It is that you bought land that serves as the security of the loan.
  • Loan Amount: The loan amount is typically 70-80% of the value of the plot. It depends on your credit score and income.
  • Repayment Period: The loan tenures may range between 5 to 15 years.
  • Interest Rates: The interest rates are relatively less because of the involvement of collaterals, hence the risk of the lender comes down.

How does a Loan to Buy a Plot work?

Step 1: Loan Application

You will need to approach a lender for a plot purchase loan. The application process usually takes the following documents along:

  • Identity proof (Aadhar card, PAN card)
  • Proof of income (tax returns, bank statements, etc.)
  • Documents related to other assets if you already possess any or business
  • Documents about the land where you are going to buy the plot

Step 2: Appraisal

The lender will go through a check on your eligibility to the loan in terms of income, credit score, the history you have as a businessman, and the kind of land intended to buy. The lender shall further value the plot to know how much value it holds in the market.

Step 3: Loan Sanctioning

After the lender decides your loan, the bank calculates your loan amount, the rate of interest along with its tenor. If everything goes well then the bank sanctions your loan.

Step 4: Loan Repayment

Once your loan gets sanctioned the dispatched loan sanctioned amount reaches the land vendor. Consequently, you are eligible enough to go and make land purchase of that piece

Step 5: Pay off Your Loan

Pay in Equated Monthly Installments. The EMI would be determined depending on loan amount, interest rate, and the time period for which the amount is to be repaid.

Loan Eligibility for Purchasing Plot

There are eligibility criteria followed by the lending company to decide who qualifies to get a loan to purchase a plot. Though these criteria might vary with different lending companies, there are a few basics and widely followed ones too. For example,

1. Credit Score

A credit score of 750 and above would be just perfect. This would manifest good ability in debt management. Meaning it could qualify the individual for a good interest rate.

2. Income and Business Stability

The lender will assess the source of income and your financial background regarding your business. This would mean having stable income, and in addition, a strong business record increases chances for a loan.

3. Age and Employment Status

You have to be between 21 and 65 years of age to qualify for the loan. The lender likes the customer to have a job or business of more than 2-3 years in operation.

4. Property Type

The land that you wish to buy should have a clean title legally and also legally valid. The title search that will be carried out by lenders on the property will reveal any dispute or lien on the property.

Plot Buying Loans Interest Rates

The interest rates for plot buy loans are subjected to several parameters, for example,

  • Credit Score : The scores are usually higher and fetch a smaller interest rate.
  • Amount for Loan : Loan interest rate is a bit steeper if the amount is huge.
  • Lender Type: Relatively, NBFC based banks are different as interest wise; they are less and the rest conditions apply vice versa.
  • Market Conditions: Current Economic condition, policies followed in Central bank, reputation Rate etc.

When will be the Right Time to Avail the Loan to Purchase a Plot?

A plot-purchase loan is best suited to small entrepreneurs who would wish to add new land to their companies for expansion but are not in a position to pay up-front. Here are some examples of how it could work well in any of the following scenarios:

1. Business Expansion

You would like to construct a new site for a manufacturing factory, office, or warehouse. You can buy a plot on loan in order to meet your capital requirement but not compromise your cash flow.

2. Property Investment

If your operation industry calls for you to have the land-that is, agriculture, for example, manufacturing and logistics-then acquiring a piece of land will be an excellent long-term investment that could appreciate over time.

3. Location Safety

If you have identified a plot of land as being just perfect to establish a base, then you can lock it down with a loan that enables you to gain ground much earlier rather than losing the chance for establishing a base.

4. Diversification of Assets

Land purchase could act as another form of diversification for business assets to reap possible gains in operational usage besides probable appreciation in values.

Balance Transfer Calculator

This balance transfer calculator is a computer-based tool to help calculate savings, in case you intend to shift your existing loan to a better lender with a favorable interest rate or terms. It would come in handy when servicing an ongoing loan for purchasing a plot and you feel like

lessening the burden on your financial front.

With a balance transfer calculator, you would come to know if it was possible to shift over to the other lender and then operate the loan in accordance.

Plot Purchase Loan Advantages

1. Interest Rate

Plot purchase loan is advanced against specific property as security; thus, the loan is advanced by the lender at lower interest rates compared to other types of loans on unsecured forms.

2. Higher value of Loan

The loan amount for plot purchases is relatively more than the personal loan that one can use to finance valuable lands' purchase.

3. Flexibility in Repayment

You can opt for any repayment tenure which suits your cash flow, say 5 to 15 years.

4. Tax Benefits

Interest can be provided as a claim from the business's income given that the use of land is significant and relevant to the nature of the business. One should seek a tax advisor for more input.

Conclusion

Plot purchasing loans are among the most essential financial tools for businesses in the process of expansion and purchasing plots that will be used for building future projects. The whole process, including eligibility criteria, will be very transparent in giving an informed decision for availing this loan in assisting the achievement of business goals. Among the other tools included, there would be a balance transfer calculator for optimal management of loans to save money in the long run.

Assess your repayment capacity and compare offers from multiple lenders and scrutinize all the terms and conditions before you apply for a loan to buy a plot. That's how the right approach can make a loan to buy a plot-a strategic investment that propels your business forward.