Tips To Follow While Applying A Loan For Land Purchase!
Posted by Bhavna Singhal on September 25th, 2019
Due to rapid populational growth, even the cost of essentials is increasing. It is also affecting agriculture because people are engaging less and less in the agricultural sector. Since India is an agrarian country, it is affecting our economy too. Although there are many reasons for this decrease, like growing urbanization, youth's reducing interest, etc., the primary goal is the increase in the prices of agricultural lands. It is not a quick scheme because buying property, then farm on it and then earn a profit is quite a long and tedious process, which makes people stay away from it.
The land prices have been increasing uncontrollably due to the work of some real-estate agencies. However, it's nota hopeless situation if you are trying to buy agricultural land. The process has been made easier by many banks and NBFCs.
Tips to Follow While Applying a Loan for Land Purchase
Here are some tips that would help you a lot if you are trying to get started on applying for a land purchase loan:
Sound knowledge of land loan interest rates: The rate of interest on the loan amount plays a significant role in deciding how much you spend. So, it is crucial to educate yourself about it. There might even be hidden charges that banks are not upfront about, and they add upon your existing financial burden. So, it is imperative to ask the bank about all the details of the rate of interest to avoid such a situation.
Eligibility criteria: Before deciding on a loan, it is advisable to check all the requirements and eligibility criteria, and if you fulfill them or not. You can use a loan calculator for this purpose, which will help you find land purchases online. All you just need to do that enter the necessary details like your location, Date of Birth, preferred tenure, monthly income (total), other sources of income, and current EMI commitments. After this, the calculator will tell you the interest and the amount you would need to pay.
Assessment of EMI: EMI can help you a great deal for the people who can't make a one-time lump-sum payment. You should look for the EMI that you can comfortably pay. The EMI calculator can help you with this task.
Documents required: Being informed about the documents that you need to submit can avoid any last-minute confusion that you might encounter. The document required are:
Duly filled the application form
Identity Proof (Aadhaar card/Voter's ID/PAN card etc.)
Address Proof (Passport/Voter's ID/Driving license)
Statements from bank
Details about the income (Form 16/Salary slips)
A good credit score: Credit Score is proof of all of your financial history. It is the numerical representation of your financial status. It also contains your track of the credit and borrowings and repayments. All the lending institutions would consider your credit score before granting you the loan. A credit score of 750+ is advisable to have if you want to get your Land Purchase Loan. A good credit score decreases the risk of the lender as it assures the lender that you were punctual about your other loan repayment.
Debt and Income Ratio: You will only get your loan approved if you have an outstanding obligation to income ratio. Every lending institution would want the borrower to be punctual with their EMIs payments. So, if you have a sufficient monthly income, it means that you will be able to pay your EMIs easily punctually.
Obtain a Construction Loan –A construction loan is a mortgage that allows you to purchase land and construct a house under a single loan. These types of loans are comparatively more comfortable to get as it includes the construction of property too. It is also thought to be a wise investment because the value of the land is likely to rise once the building is constructed.
Submit Building Plans: For increasing the likelihood of getting the loan to purchase land, it is advisable to submit your building plans to the bank. However, it should be kept in mind that the amount of the loan will only be released as and when the steps of construction are completed.
Make Larger Down Payments: Usually, you are required to pay 20 to 30% of the land value as down payment by the bank or lending institution, upon applying for a loan. You will have more chance of getting your loan approved if you opt to pay a higher amount in down payment. Granting the loan would be less risky for the lender if you make a larger down payment, and hence, increasing your chances to get the loan.
Smaller Loan Amount: Choosing a smaller loan amount for your loan would make it easier for you to repay the loan. You can do so in low EMIs. A small loan amount also means that the land is not too expensive, and hence, it can be quickly sold at a reasonable price in the future.
Closing Cost: You don't just need to look for the interest rates and processing fees when deciding on a land loan. Closing Cost is also a significant factor that you should know. In most cases, banks have some extra charges for pre-closing. So, it is crucial to know the cost.
Make a budget, including other things too: Paying for the land is not the only cost. There are additional costs too, such as paying taxes in the municipality, fencing cost, insurance, and permit costs. These expenses should also be included in your budget.
Equity Loans can help you: If you think it will be difficult for you to qualify for the Land Purchase Loan, then you can also go for equity loans. It will reduce risk for lender.
The tips mentioned above would be useful if you are trying to find a land purchase loan. Deciding on a bank or NBFC that guarantees immediate approval of loans, fast transfer of funds, a lower rate of interest, and accessibility to the account online would help the process even more.
Sometimes the financial institutions would even provide the option to complete all these processes online. This online application process can be more straightforward and would take less time, at the same time, being clearer.
If you are trying to get started in agriculture as a business, then this information could be useful to you. By doing so, you would not only do business for yourself, but it would also mean that you will be helping in providing food to the people.
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About the AuthorBhavna Singhal
Joined: June 5th, 2018
Articles Posted: 22
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