What is a Plot Loan?
So, what is a plot loan? Is it the same as a home loan? Actually, a plot loan is another type of housing loan wherein the borrower borrows money to buy land or a plot that is intended for constructing a home.
The plot can be purchased from a private developer or an individual or from government authorities.
A plot loan is almost the same as a home loan, only that in a plot loan, money owed will be used to buy a residential plot or piece of land instead of a readymade home. Same as with the home loan, those who are applying for a plot loan will be assessed according to their eligibility and also the plot they are planning to purchase.
There are two things financial institutions will look at when assessing this type of loan, one is the eligibility of the applicant, and two, the eligibility of the property.
Same as with the home loan, the financial institution will evaluate the eligibility of the applicant. Some of the things they will look at would be the borrower’s repayment capacity, which will be assessed based on their income stability, credit score, earnings, and other factors related to their finances.
The lenders will give the plot a thorough assessment in terms of different parameters such as the pricing, seller, location, type of property, and legal status. They will assess its value to also determine the amount of loan they will approve.
The documents required for a home loan may be the same as with the plot loan, such as the residence proof, which can be a driver’s license, ration card, telephone bill, election card, or any identification of the like, duly signed and filled application form, bank statements, etc.
You have to make sure that all requirements are adhered to for faster processing and approval.
Construct a house on the plot
For plot loans, the financial institution may require the borrower to construct a home on the plot on loan within an agreed time, it can be 2 years, 3 years or so. The construction must be completed in accordance with the agreed time or date of sanction.
Failure to adhere to the discussed timeframe may penalize the borrower depending on what was agreed on in the contract.
Building a house on a plot of land should be done according to what was discussed in the loan agreement, hence, as a borrower, you need to check on this information to avoid penalties.
Benefits of home loan
Whether you can afford to buy a home in cash or not, it is strongly recommended that you get a home loan. There are many benefits you can get by acquiring a home/plot loan and some of which are the following:
One of the reasons why most people get a home loan despite their ability to pay the house or plot in full is the tax benefits.
The government of India gives tax subsidies on loans as such. The borrower is eligible for tax rates from Rs 1.5 to 2 lakhs.
Credit score improvement
Provided that you pay on time, your credit score will greatly improve, hence helping you get faster approval when you apply for other types of loans.