What is the Plot Loan?
An innovative financial product called a plot loan is made to make it easier to buy a piece of land. It is frequently mistaken for being the same as a home loan and is also referred to as land loans. The distinction between a plot loan and a home loan is that a plot loan can be used to buy the land on which the future house will be built.
Many Indians dream of buying a piece of land or a plot of land on which to construct their own house. For buying land that may be used to build homes, several banks and financial organizations in India provide plot loans. Financial companies create loans specifically for land or plots, so you may pick one with ease. This is distinct from a mortgage, which is often provided to buy a home that is already habitable or soon will be.
In the following two scenarios, a plot loan is the ideal solution:
- If buying a plot to sell later on is something you’re interested in
- If you want to acquire land that was allocated directly,
- You can apply for a tailored plus secured loan and get the rewards to the fullest.
Benefits of Taking Plot Loan?
- Can be availed for purchase of residential land
- Attractive interest rates
- Affordable repayment tenures
- No pre-payment penalty
- Processing fee is low
- Minimal documentation
- Tax benefit under Section 24 and 80C of Income Tax Act
What are the requirements for eligibility for a Plot Loan?
The following is a list of the requirements that must be met in order to qualify for a plot loan:
- Profession: The borrower should be an employee or a company owner.
- Credit Score: To be eligible for enticing interest rates, a borrower’s credit score must be at least 750. As the credit score drops, the interest rates rise.
- Age: At the time of loan maturity, borrowers should not be older than 70.
- Loan Tenor: The amount of a loan’s eligibility is based on the term’s duration.
- Property Cost: The loan amount will be determined by the cost of the property.
Benefits and Characteristics of Plot Loans
The following are the main attributes and advantages of plot loans:
- Larger Loan Amount
Depending on a number of variables, a salaried or self-employed person may be able to obtain a plot purchase loan for up to Rs. 3.5 crore. The applicant’s age must fall between 18 and 65 in order to qualify for a plot loan. Additionally, the candidate’s credit score must be 750 or above. The applicant’s qualifying loan amount and payback period are determined by additional factors in addition to these eligibility requirements. These include evidence of income, a stable job, owned assets, liabilities, and a history of on-time mortgage, land, or vehicle loan payments, among other things.
- Flexible Repayment Terms
If you choose a plot loan, you can have a flexible payback term of up to 20 years. This implies that depending on the loan amount and your capacity to make EMI payments, the duration may be shortened.
- Easy And Quick Loan Disbursement
The majority of banks and financial institutions are prompt in delivering the entire loan amount within 72 hours of the date of approval. This is because buying a plot sometimes necessitates making an initial payment.
- The Unique Ability To Transfer Balances
Your existing land purchase loan may often be refinanced quickly and with little paperwork thanks to these factors. You can decide to move the remaining balance on your existing loan to a top-up loan with an extremely appealing interest rate and one with a rate that is comparably lower. There are several extra features included with this, such as part-prepayment and foreclosure.
- Instant Approval
In comparison to a home loan, when you apply for a plot loan, you receive speedier approval provided you are eligible and can present all required documentation. Many banks and financial institutions give customers the option of applying for a plot loan online, and the loan may be authorized in as little as five minutes.
- Online access to your Loan Account is simple to use
Through the online administration of your loan account, you may view the status and specifics of your plot loan. Through the bank’s or financial institution’s digital portal, you may access all the pertinent information about your loans, including the repayment plan, payment history, and other relevant data.
- Top-Up Loans with no Paperwork Required
Using a top-up loan of a larger value, you may easily satisfy all of your other financial needs. Without having to deal with the burden of any additional papers, the amount you get is in excess of the current loan amount. The top-up loan’s relevant interest rate is incredibly low.
Obtaining a Plot Loan: Documents Necessary
For a bank or other non-banking financial institution to approve you for a plot loan, the following paperwork is often needed:
- Complete and signed loan application
- Identity card provided by the applicant’s employment Three copies of a passport-size photograph
- The following may be used as identification proof: Voter ID, passport, driver’s license, and PAN card Residence proof, which may include a voter ID card, phone bill, passport, property tax receipt, and electricity bill
- candidates for non-salaried plot loans must provide documentation of their company address.
- It is required to produce the latest six months’ worth of bank or passbook statements.
- If a candidate is salaried, they must produce salary stubs from the last six months.
- Form 16/ITRs from the previous two years must be presented.
How to Get a Plot Loan Tax Exempted?
Only if a house is built on the plot can you take advantage of tax benefits on your plot loan. Only once the building is finished are tax deductions possible. You may deduct the principal repayment component up to a maximum of Rs. 1.50 lakh annually under Section 80C of the Income Tax Act.
After the house’s construction is complete and you begin living there, Section 24 of the loan’s terms allows you to get tax advantages on the interest component of the loan. You are entitled to a 2 lakh rupee yearly deduction under Section 24 of the Income Tax Act. To obtain that, though, you must convert the plot loan into a standard home loan. You must also take advantage of interest rate reductions and lower interest rates for pre-construction in addition to this.