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Best Personal Loans For Land Purchase Financing March 2024

Land can sometimes be a great investment you can use a personal loan to purchase land without using the land as collateral. Our comparison page has top lenders' offers for getting a loan for land. Getting a loan to buy land is a great way to secure your perfect spot. Find top rates and terms on our page to suit your needs.

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Key Facts

  • Free-to-use marketplace with a choice of vetted lending partners.
  • Borrowers are in control and can compare competitive loan options.
  • No prepayment fees and origination fees as low as 0%
  • Max Loan Amount: $100K

Pros

pros iconGreat for Comparing Lenders

pros icon Fast and Easy

pros iconSecure 256-bit encryption

Cons

cons iconFees Vary

cons iconOther Variable Info

cons iconTerms are Limited

Personal Loans Rate and Terms Disclosure: Rates for personal loans provided by lenders on the Credible platform range between 4.60% – 35.99% APR with terms from 12 to 84 months. Rates presented include lender discounts for enrolling in autopay and loyalty programs, where applicable. Actual rates may be different from the rates advertised and/or shown and will be based on the lender’s eligibility criteria, which include factors such as credit score, loan amount, loan term, credit usage and history, and vary based on loan purpose. The lowest rates available typically require excellent credit, and for some lenders, may be reserved for specific loan purposes and/or shorter loan terms. The origination fee charged by the lenders on our platform ranges from 0% to 8%. Each lender has their own qualification criteria with respect to their autopay and loyalty discounts (e.g., some lenders require the borrower to elect autopay prior to loan funding in order to qualify for the autopay discount). All rates are determined by the lender and must be agreed upon between the borrower and the borrower’s chosen lender. For a loan of $10,000 with a three year repayment period, an interest rate of 7.99%, a $350 origination fee and an APR of 11.51%, the borrower will receive $9,650 at the time of loan funding and will make 36 monthly payments of $313.32. Assuming all on-time payments, and full performance of all terms and conditions of the loan contract and any discount programs enrolled in included in the APR/interest rate throughout the life of the loan, the borrower will pay a total of $11,279.43. As of March 3, 2022, none of the lenders on our platform require a down payment nor do they charge any prepayment penalties..

Prequalified rates are based on the information you provide and a soft credit inquiry. Receiving prequalified rates does not guarantee that the Lender will extend you an offer of credit. You are not yet approved for a loan or a specific rate. All credit decisions, including loan approval, if any, are determined by Lenders, in their sole discretion. Lenders will conduct a hard credit pull when you submit your application. Hard credit pulls will have an impact on your credit score. Lowest rate advertised is not available for all loan sizes, types, or purposes, and assumes a very well qualified borrower with an excellent credit profile. Loan Example: A $10,000 loan with a 5-year term at 13% Annual Percentage Rate (APR) would be repayable in 60 monthly installments of $228 each. The actual payment amount and year-end balance will vary based on the APR, loan amount, and term selected. In this case the total amount expected to pay by the borrower will be $13,680.

Bonus disclosure:
“All bonus payments are by gift card.”

*Not all available financial products and offers from all financial institutions have been reviewed by this website

  • $600-$100K Loan Amount
  • 550 Min Credit
  • 6.40-35.99% APR
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Key Facts

  • Competitive rates available for good credit scores and income source
  • Access to financial advisors, private networking events, & unemployment protection
  • Flexible terms & payment options with no fees whatsoever
  • Max Loan Amount: $100K

Pros

pros iconPersonal loan application process is easy and only takes a few minutes to complete

pros iconSoft credit check that doesn’t affect your credit score and gives you personalized rates

pros iconFixed and variable rate loans available ranging from $5,000 to $100,000

pros iconNo late or origination fees required

pros iconExcellent customer support team

pros iconOnline autopay comes with a discount on interest

pros iconExclusive benefits for members (ex. networking events and access to financial advisors)

pros iconUnemployment Protection feature comes with a temporary payment pause (up to 12 months)

pros iconNo prepayment penalties

Cons

cons iconMay take up to 4 days to receive funds after approval (longer than other online lenders)

cons iconHigh eligibility requirements (ex. good credit and sufficient income)

“SoFi” is a registered trademark of Social Finance, Inc. SoFi is not affiliated with colleges and universities listed on SoFi.com. Colleges and universities listed on SoFi.com do not endorse, promote or recommend SoFi loan products.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status and and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, years of professional experience, income, and a variety of other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Financial Protection and Innovation under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp. or an affiliate, NMLS # 1121636. (www.nmlsconsumeraccess.org)

Loan Example: A $10,000 loan with a 5-year term at 13% Annual Percentage Rate (APR) would be repayable in 60 monthly installments of $228 each. The actual payment amount and year-end balance will vary based on the APR, loan amount, and term selected. In this case the total amount expected to pay by the borrower will be $13,680

✝︎ To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

©2022 Social Finance, Inc. All rights reserved.”

Fixed rates from 3.99% APR to 9.99% APR reflect the 0.25% autopay interest rate discount and a 0.25% direct deposit interest rate discount. SoFi rate ranges are current as of 01/16/24 and are subject to change without notice. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed and will depend on the term you select, evaluation of your creditworthiness, income, and a variety of other factors.Loan amounts range from $5,000– $100,000. The APR is the cost of credit as a yearly rate and reflects both your interest rate and an origination fee of 0%-6%, which will be deducted from any loan proceeds you receive.Autopay: The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Autopay is not required to receive a loan from SoFi.Direct Deposit Discount: To be eligible to potentially receive an additional (0.25%) interest rate reduction for setting up direct deposit with a SoFi Checking and Savings account offered by SoFi Bank, N.A. or eligible cash management account offered by SoFi Securities, LLC (“Direct Deposit Account”), you must have an open Direct Deposit Account within 30 days of the funding of your Loan. Once eligible, you will receive this discount during periods in which you have enabled payroll direct deposits of at least $1,000/month to a Direct Deposit Account in accordance with SoFi’s reasonable procedures and requirements to be determined at SoFi’s sole discretion. This discount will be lost during periods in which SoFi determines you have turned off direct deposits to your Direct Deposit Account. You are not required to enroll in direct deposits to receive a Loan.

  • $5K-$100K Loan Amount
  • 680 Min Credit
  • 8.99-25.81% APR
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Key Facts

  • Useful mobile app to manage your loan
  • Accepts co-signer and joint applications
  • Wide range of term lengths and amounts

Pros

pros iconFast funding time

pros iconGreat reputation

pros iconLow-fee loans

pros iconWide range of term lengths

Cons

cons iconYou need to be a PenFed Credit Union member to get a loan

cons iconDoesn’t disclose all eligibility requirements

This website is an informative comparison site that aims to offer its users find helpful information regarding the products and offers that will suit their needs. We are able to maintain a free, high-quality service by receiving advertising fees from the brands and service providers we review on this website (though we may also assess brands we are not engaged with).

These advertising fees, combined with our criteria and methodology, such as the conversion rates, our team of reviewers’ findings and subjective experience, and product popularity, impact the placement and position of the brands within the comparison table. In the event that we assign ratings or scoring, they are based on the standing in the comparison table or according to the other formula in the event detailed explicitly by us. See our How we Rate page and Terms of Use for information.

The reviews, ratings, and scoring are provided “as is” without guarantees or warranties regarding the information contained on our website, which shall not be considered as endorsement. We do our best to keep the information up-to-date. However, an offer’s terms might change at any time. We do not compare or include all service providers, brands, and offers available in the market. Loan Payment Example: A $35,000 personal loan financed at 4.99% APR would amount to 60 monthly payments of approximately $676.49 each.

  • $600-$50K Loan Amount
  • 690 Min Credit
  • 8.49-17.99% APR
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Key Facts

  • Discounts for Upgrade account owners
  • No prepayment fees
  • Fast funding in 1-4 days

Pros

pros iconOffers a small minimum loan amount

pros iconDeals with credit scores of at least 580

pros iconNo early prepayment fee

pros iconQuick time to funding

pros iconSolid mobile app to manage loans

Cons

cons iconCharges origination fee

cons iconLate fees in place

Personal loans made through Upgrade feature Annual Percentage Rates (APRs) of 8.49%-35.99%. All personal loans have a 1.85% to 9.99% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. Loans feature repayment terms of 24 to 84 months. For example, if you receive a $10,000 loan with a 36-month term and a 17.59% APR (which includes a 13.94% yearly interest rate and a 1.85% to 9.99% origination fee), you would receive $9,500 in your account and would have a required monthly payment of $341.48. Over the life of the loan, your payments would total $12,293.46. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by Upgrade’s bank partners. Information on Upgrade’s lending partners can be found at https://www.upgrade.com/lending-partners/.

Fast Funding Disclosure: *Accept your loan offer and your funds will be sent to your bank or designated account within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes the transaction. From the time of approval, funds sent directly to you should be available within one (1) business day. Funds sent directly to pay off your creditors may take up to 2 weeks to clear, depending on the creditor.

  • $1K-$50K Loan Amount
  • 580 Min Credit
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Key Facts

  • Wide range of loan term lengths.
  • No prepayment penalties.
  • Enjoy additional services Axos offer.

Pros

pros iconNo prepayment penalties

pros icon1-year loan terms available

pros iconFast, 2-day funding

pros iconWide range of loan terms

Cons

cons iconHigh credit score requirements

cons iconOrigination fee

cons iconShorter loan terms

Axos Bank® offers bank products and services. All deposit accounts through Axos Bank brands are FDIC insured through Axos Bank. All deposit accounts of the same ownership and vesting held at Axos Bank are combined and insured under the same FDIC Certificate 35546. All deposit accounts through Axos Bank brands are not separately insured by the FDIC from other deposit accounts held with the same ownership and vesting at Axos Bank. For more information, read our FDIC Notice. Axos Bank NMLS# 524995. For example, if you get approved for a $15,000 loan at 6.99% APR for a term of 72 months, you’ll pay just $256 per month for a total amount of $18,432.

 

  • $5K-$50K Loan Amount
  • 690 Min Credit
Powered by Credible
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Key Facts

  • Good credit gets low rates and zero fees
  • Fast and easy online process
  • $100 Loan Experience Guarantee¹
  • Max Loan Amount: $100K
  • Powered by Credible

Pros

pros iconGet a loan for practically anything

pros iconAutopay discount available

pros iconDedicated app to manage your loan

pros iconLightStream doesn’t charge any fees

Cons

cons iconPersonal loan up to $100K

cons iconRequires steady income

cons icon1-3 Days till funding

LightStream is a part of Truist Bank. While most correspondence will come from LightStream, you might notice the name Truist on certain communications from us. We continue to serve customers across all 50 states, and you do not need to be an existing customer to qualify for a LightStream loan.

Your loan terms, including APR, may differ based on loan purpose, amount, term length, and credit profile. The lowest rates require excellent credit. At least 22% of approved applicants applying for the lowest rate qualified for the lowest rate available based on data from 07/01/2022 to 09/30/2022.

Rate is quoted with an AutoPay discount. AutoPay discount is only available before loan funding. Rates without AutoPay are 0.50% points higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 4.99% APR with a term of 3 years would result in 36 monthly payments of $299.66.

  • $5K-$100K Loan Amount
  • 660 Min Credit
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Key Facts

  • Flexible repayment options
  • Great for customers with bad credit score
  • Safe and secure

Pros

pros iconEasy, fast application process

pros iconFunds are disbursed quickly

pros iconBuilds personal credit

Cons

cons iconHigh fees and interest charges

cons iconNo co-signed, joint, or secured loan option

cons iconNo rate discount for automatic payments

Loan Example: A $10,000 loan with a 5-year term at 13% Annual Percentage Rate (APR) would be repayable in 60 monthly installments of $228 each. The actual payment amount and year-end balance will vary based on the APR, loan amount, and term selected. In this case the total amount expected to pay by the borrower will be $13,680

  • $2K-$35K Loan Amount
  • 580 Min Credit
  • 9.95-35.99% APR

March 2024

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Overview

Rocket Mortgage is the largest mortgage provider in the US. This online-only offering closed over $350 billion of mortgage funding in 2021, and the company continues to go from strength to strength. It was the first company to lead with an online-only application for mortgages, and its technology for swift and efficient decision-making is excellent. Rocket Mortgage employs over 24,000 people and is headquartered in Detroit, Michigan.

Pros

pros iconClosing costs rolled into loan automatically

pros iconSmartphone app

pros iconSyncs with your bank account for easy application process

pros icon98% of financial institutions supported for digital asset verification

Cons

cons iconCan’t have face-to-face interaction with loan officer; online only

cons iconNo alternative credit data considered

  • check mark Fast, guided and simplified online process
  • check mark Lock in your rate for 90 days
  • check mark Unique support for first-time homebuyers
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Overview

AmeriSave is a company that focuses on all things mortgage-related. It is one of the biggest US retail mortgage firms, operating in nearly every state. In operation for more than two decades, AmeriSave has served over 640,000 borrowers during that time.

One of its main strengths is its quick customized pre-qualification process and its flexible repayment arrangements. This AmeriSave review will look at all aspects of what the company brings to the table.

Pros

pros iconEasy online application process

pros iconTransparent information on their website

pros iconCustomized rates and quick pre-qualification

pros iconDiverse range of loan options

pros icon3% minimum down payment on offer

pros iconAccurate quotes given

Cons

cons iconLock fee of $500

  • check mark Protect your rate while you home shop—Lock & Shop
  • check mark Fast pre approval letter with rate lock protection
  • check mark 20+ years of experience with A+ BBB rating

While nothing quite compares to buying a dream home, building one takes the dream to a whole new level. The first step forward in this exciting endeavor is to buy up the land your home will sit on, which can be a pricey venture, not to mention all of the costs involved in building your home. This is where a land mortgage loan comes into play.

Top Land Purchase Financing Personal Loan Providers

660

Min Credit Score

7.99-25.49%

APR. Fixed Rate

$5K-$100K

Loan Amount

2-7 years

Repayment terms

No

Soft Credit Pull

Direct

Lender Type

None

Other Fees

None

Origination Fee

None

Prepayment Fee

1 days

Funding Time

Pros & Cons

drop-down-btn
  • con-icon Get a loan for practically anything
  • con-icon Autopay discount available
  • con-icon Dedicated app to manage your loan
  • con-icon LightStream doesn’t charge any fees
  • con-icon Personal loan up to $100K
  • con-icon Requires steady income
  • con-icon 1-3 Days till funding

Loan Purpose

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  • Car
  • Major Purchase
  • Household Expenses
  • Vacation
  • Wedding
  • Other

Loan Type

drop-down-btn
  • Secured Personal Loans
  • Unsecured Personal Loans
  • Fixed-Rate Personal Loans
  • Variable-Rate Personal Loans
sofi logo
SoFi

Low Rates. No Fees are Required.

680

Min Credit Score

8.99-25.81%

APR. Fixed Rate

8.99-25.81%

APR. Variable Rate

$5K-$100K

Loan Amount

24 to 84 months

Repayment terms

Yes

Soft Credit Pull

Direct

Lender Type

None

Other Fees

None

Origination Fee

None

Prepayment Fee

Same-day funding if approved before 7:00 PM ET days

Funding Time

Pros & Cons

drop-down-btn
  • con-icon Personal loan application process is easy and only takes a few minutes to complete
  • con-icon Soft credit check that doesn’t affect your credit score and gives you personalized rates
  • con-icon Fixed and variable rate loans available ranging from $5,000 to $100,000
  • con-icon No late or origination fees required
  • con-icon Excellent customer support team
  • con-icon Online autopay comes with a discount on interest
  • con-icon Exclusive benefits for members (ex. networking events and access to financial advisors)
  • con-icon Unemployment Protection feature comes with a temporary payment pause (up to 12 months)
  • con-icon No prepayment penalties
  • con-icon May take up to 4 days to receive funds after approval (longer than other online lenders)
  • con-icon High eligibility requirements (ex. good credit and sufficient income)

Loan Purpose

drop-down-btn
  • Credit Card Refinance
  • Debt Consolidation
  • Home Improvement
  • Major Purchase
  • Medical Expenses
  • Relocation
  • Vacation
  • Wedding

Loan Type

drop-down-btn
  • Unsecured Personal Loans

690

Min Credit Score

8.49-17.99%

APR. Fixed Rate

8.49-17.99%

APR. Variable Rate

$600-$50K

Loan Amount

6 months to 6 years

Repayment terms

Yes

Soft Credit Pull

Direct

Lender Type

Yes

Other Fees

None

Origination Fee

None

Prepayment Fee

1-2 days

Funding Time

Pros & Cons

drop-down-btn
  • con-icon Fast funding time
  • con-icon Great reputation
  • con-icon Low-fee loans
  • con-icon Wide range of term lengths
  • con-icon You need to be a PenFed Credit Union member to get a loan
  • con-icon Doesn’t disclose all eligibility requirements

Loan Purpose

drop-down-btn
  • Debt Consolidation
  • Home Improvement
  • Medical Expenses
  • Other

Loan Type

drop-down-btn
  • Unsecured Personal Loans

Personal Loan to Buy Land

A land purchase loan is a loan specifically designed for those looking to buy a plot of land. Like any other loan type, land financing can be done the traditional route—through a bank or credit union—or through an online lender, which may offer more favorable land loan rates.

Unlike other loan types, especially a mortgage where a specific dollar amount is assigned to a property, a land purchase loan may be more difficult to compute. Because there is no collateral or asset on the land, a borrower can default on a Land Purchase loan more easily than if they default on a car or house.

Moreover, the land is not as easy to sell as a house, as it is not as much in demand. For this reason, you can expect interest rates and the down payment for Land Purchase loans to be higher, as there is more at risk for the lender. Therefore, you need to carefully plan how you will use the land tied to a Land Purchase loan agreement. Doing so will give you the motivation to use the land so it will become more valuable.

Good terms to know

  • Collateral: This is an asset that a lender can seize in case a borrower defaults on their loan. Collateral may be sold to recoup some or all of the losses on the loan.
  • Loan-to-value ratio (LTV): This term is used by lenders to examine the ratio of a loan to the value of an asset, such as a piece of land purchased.
  • Interest rate: This is the amount charged by a lender on top of the amount borrowed.
  • Annual Percentage Rate (APR): The total annual rate charged for borrowing from a lender.
  • Credit score: A three-digit number that represents how risky you are as a borrower based on your credit history.

Types of Land Loans

There are several types of land loans to be aware of when searching for the best land loan lenders and before applying and comparing land loan rates. Let’s take a look!

  • Raw Land Loans – This loan type is used for a piece of land that will not be developed or built upon. It’s the riskiest of all lot loans for lenders since there is nothing significant to use as collateral, such as a building or home.
  • Vacant Land Loans – This type of loan is for a piece of land that will undergo some type of renovation or improvement so that they’re ready for construction. It’s for those who intend to build on top of the land.
  • USDA Land Loans – If you intend to purchase land in a rural area for farming or other agricultural purposes, you may qualify for a USDA loan. This subsidized loan secures property that will build new farms, establish crops, enhance existing farming operations, or for alternative farming methods.
  • SBA 504 Loan – A Small Business Administration (SBA) 504 Loan is for businesses that intend to buy up land for commercial development. With this type of loan, the SBA works with a lender to secure the property value so that the business owner will only have to supply a 10% down payment. SBA and the lender finance the rest.
  • Construction Loans – This loan option is for those intending to construct on their land but doesn’t want to deal with taking out two loans. With a construction loan, the money will be used to finance not only the land itself but also the construction work.

Top Land Loan Reviews

sofi logo
SoFi
  • APR: 8.99-25.81%
  • Loan Term: 24-84 months
View rates
Credible
  • Fixed APR: 5.20-35.99%
  • Loan Term: 12-84 months
View rates
penfed logo
PenFed Credit Union
  • Useful mobile app to manage your loan
  • Accepts co-signer and joint applications
View rates

Land Purchase Financing – How to Get Started

To apply for a personal loan for a Land Purchase, you will need to take the following steps.

  • Check Your Credit Score. When you apply for any type of personal loan online, you need to review your credit score first through the 3 credit bureaus. Because your personal loan for a Land Purchase is primarily based on your credit score, knowing the score will help you determine what APR you will be charged.
  • Select Your Loan Type. Some companies specialize in Land Purchase loan funding, so it is better to go through them if you want the best rates for this loan type.
  • Get Prequalified for Land Purchase Loan Financing. When you choose several lending providers you like, you will need to get prequalified for your construction loans for land next. Doing so will give you the repayment details and terms for your Land Purchase loan funding requirements. If you agree to shorter loan terms, you can also get a lower fixed APR.
  • Compare the Lenders. After you have had a chance to get prequalified through different Land financing options, you can review their loan terms and APRs, and see which one fits best with your lending or personal finance requirements. For a Land Purchase personal loan, go with a lender that offers the lowest APR and features the lowest fees over the term of the loan.
  • Supply the Necessary Info and Documents. When you choose a lender, you will need to provide the required loan documents and information for Land Purchase loan funding. In this case, you need to supply the following details and documents:
    • Personal Identification (Social security card, passport, or driver’s license)
    • Proof of earnings or income (W-2s, paystubs, or filed tax returns)
    • Employer information (Name of company, manager’s name, and phone number and address)
    • Banking information (account details, including the routing and account numbers)
    • Proof of residence (utility bill with your name and address or a lease agreement)
  • Apply for the Loan and Start Making Payments. After you apply for your Land Purchase loans and start making payments, you might add some extra money to your payment each month to repay the loan faster. Doing so will make the loan repayment smoother and simpler.

Personal Loan for Land - All You Need to Know

To take out a Land Purchase loan, you should be aware of the following terms:

  • Annual Percentage Rate (APR) – The rate of interest charged on a Land Purchase loan, expressed at an annual rate.
  • Application Fee – The amount a lender charges for processing a Land Purchase loan application and the related documents. These fees are usually non-refundable and may or may not be included in processing a Land Purchase loan.
  • Collateral – An asset or property secured against a loan. The land you buy with a Land Purchase loan does not feature assets, such as buildings, so the online financing is non-collateralized.
  • Debt-to-Available Credit Ratio – When considering you for a Land Purchase loan, a lender may look at your debt-to-available credit details. This represents the money you owe compared to the credit available through credit lines and credit cards. Therefore, the debt-to-available credit ratio shows how much available credit you are using. The higher this percentage, the riskier you appear to a lender.
  • Debt-to-Income Ratio – The percent of your monthly pre-tax income used to pay off debts, such as auto loans, credit cards, and student loans. Lenders assess 2 key ratios. The first ratio is a front-end ratio or the percent of monthly pretax earnings spent on your house payment. The second percent is a back-end ratio or the other debts that are factored into the house payments.
  • Late fee – A fee charged to customers who take out a Land Purchase loan who pay a payment late or pay less than the required monthly amount.
  • Late Payment – A delinquent payment or a failure to pay on a Land Purchase loan before the agreed due date. A late payment can hurt your credit score for as long as 7 years.
  • Loan-to-Value Ratio (LTV) – A Land Purchase lender uses this ratio to assess the value of a loan to an asset, such as land.
  • Land Purchase Loan Lender – The financial institution that provides a Land Purchase loan for paying for a parcel of land.
  • Net Income – Your income after taxes has been deducted. It is also called your take-home pay. A lender considers this amount when assessing your ability to repay a loan amount.
  • Prepayment Penalty – A fee charged by a lender when a borrower pays off a loan before its scheduled term. Usually, prepayment penalties are not applied by standard lenders. If you are taking out a subprime Land Purchase loan, you need to read the loan terms carefully, as this fee may be applied.
  • Principal – The amount of money owed on a Land Purchase loan, excluding the charged interest or APR.
  • Risk Score – Another name for a credit score.
  • Subprime Borrower – Some people who request a Land Purchase loan funding may be subprime borrowers. A subprime borrower usually has a poor credit score because of late payments or collection accounts. Lenders evaluate and grade subprime borrowers on the degree of past collection problems – A to D, or lower. Subprime borrowers can qualify for personal loans for land but at a higher interest rate.
  • Utilization Ratio – A ratio that shows a lender how much available credit you are using.
  • Unsecured Loan – Most personal loans online are not collateralized. If you take out a personal loan for a land purchase, it is usually unsecured. Therefore, the lender assesses your ability to repay based primarily on your credit score.

Land Loans vs. Mortgages, What’s the Difference?

While they seem similar, mortgages and land loans are two very distinct loan types.

  • Purpose – One major distinction is the purpose of each loan. A mortgage is used to buy a home, plain and simple. A loan for land purchase, on the other hand, is used to buy the land a home will sit on. So those looking for land financing are most often doing so with the purpose of constructing a home on it. Some land loans will cover the costs of building the home, but most will only cover the costs involved in preparing the raw, unpolished land for construction.
  • Collateral – Another big distinction between a mortgage and a loan to buy land is the value of the collateral. A piece of land is almost always worth less than that same piece of land with a home on it. Consequently, the collateral for a mortgage is worth much more than the collateral for a land loan. Because of this, plus the fact that it’s harder to determine the value of a plot of land, you have a lower loan amount, or in other words, a low loan-to-value ratio.
  • Risk factor – As mentioned earlier, loans to buy land are a riskier transaction than mortgages since they’re less valuable collateral. They’re also riskier for borrowers due to their low loan-to-value ratio. So for example, if you take out a land loan for $100,000 to develop a piece of land worth $400,000, defaulting on the loan would mean losing out on $300,000 of value. On the other hand, mortgages aren’t as risky in this sense because they’re typically at 80-90% loan to value. So in other words, a borrower will put down 10-20% and lose out on much less if they default.

Conclusion

Purchasing a plot of land may feel like an unfamiliar and even daunting undertaking, but it can be a relatively straightforward process once you know what’s involved. If you have a clear plan for the land you plan on purchasing. The next step is to determine which loan type fits your needs and look at current land loan rates to find the best land loan, the lender.