Can you use a personal loan to purchase your block of land?

Last updated on March 15th, 2021 at 11:28 am by Bill Tsouvalas

Getting a foot on the property ladder may be a tight squeeze for many Australians. With the high property prices, Aussies are looking for alternative ways to make it onto the market. One of these ways is using a personal loan to secure land to build property. You may be able to find a lender that approves personal loans that can be used to purchase a block of land, but there are a few things that need to be considered before you do.

Personal loan to buy land

Understand how using a personal loan to buy land works

Purchasing land that you are planning on building property from scratch may have the perks of getting you somewhere when it comes to getting a place to call home. Since a personal loan is not a mortgage and you will be purchasing land, no security will be required. However, before you jump on the personal loan bandwagon to purchase land it is important to consider the interest rate that comes with it.

Since this is technically a high risk for a lender, that doesn’t require any security on your part, you could end up paying a high interest rate. This won’t block you from comparing lenders and finding one that offers a competitive rate that is suitable to your finances.

$8 million worth of personal loans was used to purchase land

Data by the Australian Bureau of Statistic revealed that Aussies borrowed a total of $8 million in personal loans to secure land. This is despite a drop of 0.6% in personal loan commitments. This can be seen as an alternative for many Aussies who want to crack the property market but are unable to find a property that matches their needs or a home loan that is suitable for their finances.

Not all lenders offer a loan that can be used towards purchasing vacant land. Therefore, check if your lender offers you this option.

Things to consider when looking for a personal loan to secure land

Putting in the research can let you know if a loan will work for you. This means knowing what is available out there and comparing lenders before signing on the dotted line for a loan. Things that you can consider are:

  • What type of land do you want to purchase? By knowing the reasons behind purchasing land can narrow down your search for the right land. This can also help you calculate the costs of building your house from scratch to see if it is within your reach or not.
  • Have you considered the time frame to build from scratch? Carefully consider the time frame it will take to complete the building of your property on vacant land along with the costs involved. You can use a home loan calculator to check if you will be able to make repayments on your loan.
  • When is the best time to make a purchase? Researching the trends of purchasing land can help you know when are the best times to buy land. Remember that regions differ when it comes to property and land sales. Therefore, compare the various places in which you are interested to find the best time to place your offer.

Compare personal loans today

We’re here to help you find the most affordable options, so there’s no better way to compare personal loans and rates than right here, all in one place.