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.