Personal Loans to Buy Land

Once you have found the perfect piece of land in an ideal location, it’s time to figure out how to pay for it. If you don't want to deplete your savings, sell off your stocks, or get a home equity loan, then consider a personal loan for land purchase. Personal loans to buy land can be found online, at your bank, or credit union, and don’t require any collateral or equity. Our team of financial experts reviewed and ranked more than 30 online lenders to help you get funded.

Best Personal Loans to Buy Land in 2023 - Full Overview

How to Choose the Best Personal Loan to Buy Land?

When buying land with a personal loan, you will want to keep a few things in mind. It’s important to compare apples to apples, so you need to know the rates, terms, fees, and qualifications for all of the personal loans to buy land. Our experts used these important parameters and more to rank the lenders.

Consider the following factors

• Loan Features: Keep in mind the loan terms, loan amounts, and loan use limitations. Make sure that you’re allowed to use the personal loan to purchase land. Land prices vary but know what the loan limits are to see if you can borrow enough to buy the plot of land you want.
• Interest rates and fees - Considers different types of fees including application fees, origination fees, and prepayment penalties. You should also know the minimum and maximum interest rates and what rate you will qualify for. 
• Application process - Be aware of the invasiveness of the loan application process. What are the information requirements? Does the lender do a hard or soft-credit pull? How long does it take to apply, get approved, and get funded? Are there any distinctively competitive offerings?
• Qualification process - Each lender has their own qualification process. Know the minimum credit score, income requirements, co-signer/joint application optionality, or membership requirements. You don’t want to waste time applying if you don’t meet all of the criteria. 
• Customer support - Consider accessibility to a live CSR rep, the degree of multi-channel support, and the availability of supplemental information and tools. Make sure that you can get your questions answered when it is convenient for you. 
• Online user reviews - Check out reviews on independent review sites like Trustpilot and see what real customers are saying about their experience with the lender. Did they encounter any problems? What are overall positive and negative comments saying?
• Perks and Bonuses - Consider specified service offerings like payment flexibility, advertising transparency, and advanced technology. Does the lender offer anything else that is of interest? 

Can You Use a Personal Loan to Buy Land?

The answer to can you use a personal loan to buy land, is typically yes. The majority of personal loans can be used for practically any purpose which means they can be used to purchase land. Loan amounts vary and can range anywhere from $1,000 to $100,000, but most are capped around $50,000. Rates also vary but are generally between 5% and 35% depending on your credit score. Loan terms vary by lender but are typically between two and five years. 

How To Buy Land With A Personal Loan

Now you know the answer to, Can I get a personal loan to buy land, is yes. You need to know the step-by-step process of how to do it.

• Prepare: Know your credit score, and have your documents handy and organized. You will need proof of identification, proof of employment, and you may also need pay stubs, tax returns, and bank statements. 
• Budget: How much can you afford to spend? Think about the total cost of the land, the loan fees, and what you can afford to pay monthly. Don’t forget the ongoing land costs such as utilities, insurance, and any building costs. 
• Compare: Know what each lender offers so you can compare their fees, loan application process, funding time, interest rates, and terms. 
• Apply: How do you apply? Can you apply online, in a branch, or over-the-phone? Know how intensive the application process is, what documents are needed, and approximately how long it will take. 
• Funded: Once your loan application is accepted, how long does it take to get funding? And how will you receive the funds? Lenders usually directly deposit the money into your account through a wire and others will give you a check. 
• Purchase land: Put the funds towards purchasing the land you want. Know how much not just the land is going to cost, but any additional fees such as appraisals, inspections, and surveys. 

Pros And Cons Of Using A Personal Loan to Buy Land

The advantages and disadvantages of using a personal loan to purchase land are: 

Pros of Using A Personal Loan to Buy Land

• Easy application process: usually seamless and online
• Fast funding: As fast as the same day you’re approved
• No collateral or equity needed to qualify 

Cons of Using A Personal Loan to Buy Land

• Low loan limits: May only go up to $50,000 or max $100,000
• Higher interest rates overall 
• Lower credit scores may only qualify for small loan amounts 

Personal Loans vs. Land Loans vs. Construction Loans

Personal loans, land loans, and construction loans can all be used to purchase land. They do have some similarities but have a lot of differences too. 

Personal loans

Personal loans are unsecured loans that can be used for almost any purpose. You typically apply online in a few minutes, get a quick approval based on your credit score and financial profile, and you will receive fast funding. Unlike land and construction loans, personal loans don’t require any collateral. They are more multi-purpose and can be used for things besides land, such as paying for an emergency repair, medical bills, or even a family vacation. 

Land loans

Land loans, as the name suggests, are specialty types of loans used specifically to purchase land. They’re also called lot loans. Unlike personal loans, you do need the land as collateral for a land loan, and the land must qualify, just as the borrower needs to qualify. The application process is more in-depth than with a personal loan and you will need a purchase contract in place for the land. Land loans typically have lower rates than personal loans, but require more paperwork, and take longer to fund.

Popular types of land loans include:

• Raw land loans: A loan for completely undeveloped land that doesn’t include any roads, electricity, or a sewer system. You will need to have a plan for what you’re going to do with the land and specifically draw out how it’s going to be developed. 
• Unimproved land loans: These loans are for land that is slightly more developed than raw land. These types of loans can be used to finance land that may have some utilities or amenities but not all of them. 
• Improved land loans: These are typically the easiest to qualify for and are used to purchase land that already has road access, electricity, and water. This land is considered to be developed and poses less risk for the lender so rates and down payments are lower than for other types of land loans. 

Construction loans

Construction loans are another option for purchasing land. They’re easier to qualify for than unimproved or raw land loans. They’re used to purchase the land and to finance the construction of whatever is going to be built on the land. These loans are typically short-term with one or two year terms and then are refinanced into longer-term loans once construction is finished. This type of loan can help you afford the construction costs of the loan, but it’s not a long term solution.

Other Alternatives To Buying Land With A Personal Loan

Here are a few alternatives to consider instead of using personal loans to buy land: 

USDA Loans

USDA loans are offered to rural property owners by the United States Department of Agriculture. These may be used to purchase land, a farm, land with a house or barns, or to build on, among other property types. They’re designed to improve the quality of life in rural areas and offer zero down payment options to qualified individuals. Keep in mind, there are strict borrower income qualifications and you must be in what is considered a ‘rural’ area, so no, you can’t purchase a suburban farm style house with one of these loans. However, if you do qualify, you can get a competitive rate and even finance the construction of your new home with a long-term loan. 

Public or private non-profit organizations can also use USDA loans. Section 523 loans can be used to develop land for low-income families that are participating in the mutual self-help program. Section 524 loans can be used to develop low and moderate-income families.  

Home Equity Loans

A home equity loan, also referred to as a second mortgage, is a home loan that you can apply for at your bank, credit union, or some online lenders. The loan allows you to borrow against the equity in your house and you get the funds all at once in a lump sum. You do need to meet the lender’s qualifications and have enough equity in your home to qualify. Funding may take 30-45 days so if you need quick money, this may not be the best option. However, rates are more competitive than those of personal loans. 

HELOCs

A HELOC is a home equity line of credit. It’s basically a revolving line of credit offered by a bank, credit union, or online lender, and it works similarly to a credit card. You get access to a specified amount of money and can make withdrawals during the draw period. You do need to personally qualify for the loan and have enough equity in your home to qualify as well. You don’t get access to a lump sum, but instead use the money as you need it, which can be beneficial for ongoing construction projects. 

Seller Financing

Seller financing is when the seller acts as the lien holder and instead of making payments to a mortgage company or lender, you pay the seller. The seller can set his/her own terms including down payment amount, credit criteria, loan length, and interest rate. Seller financing can be a good option if you wouldn’t otherwise qualify for a loan. It can also be a good short-term option so you can buy land in a competitive market, and then refinance it with a bank or mortgage lender, once you qualify. However, it’s best to have a real estate attorney draw up the paperwork so all parties know what the conditions are and so the contract is legally binding on both ends. 

SBA 504 Loans

SBA (Small Business Administration) 504 loans are long-term loans that have fixed rates and offer financing up to $5 million for major fixed assets. They’re intended to promote job creation and business growth. These loans are available through SBA’s community based partners and are regulated and certified by the SBA. They can be used to purchase existing buildings, land, or to construct a building. These loans can be great if you want to build a project and hire local workers, or if you need a loan larger than a personal loan limit. However, they do have restrictive uses, such as no investing in rental real estate, and no debt consolidation. The application process is also much longer than other types of loans. 

Tips for the Land-Buying Process

Here are some tips to make the land-buying process easier:

• Do your research: Know the land boundaries, pay for a survey, find out if utilities are already there, or how they will be hooked up. Also, be aware of zoning restrictions and if there is a well or septic tank on the property. 
• Consider usage: What do you plan to use the land for? If you’re going to build a house, know how much that will cost, plus the cost of the land, and then check out how much existing neighboring houses are worth to make sure it’s a sound investment. Also, know what the property can and can’t be used for. If you want to have a horse farm, and it isn’t in an agriculturally zoned area, you may need to reconsider your plans. 
• Internet and cell service: If you’re in a remote area, consider how you will be able to access the internet and have cell reception. This is especially important today with more people working from home and owning multiple devices that require internet connection. Even in a non-remote area, find out what providers are available and if underground or above-ground lines are already run. 
• Consider the property taxes: Know the current tax rate, how much the current taxes are, if any back taxes are owed, and how the tax rate will change once you build on the land. Vacant land tax will usually be much lower than tax for a house or a housing development. 

Conclusion

Now that you know that you can use personal loans to buy land, you want to get the best possible deal. Knowledge is power and can save you money. Know your credit score and have all your documents in order and available for the application process. In addition, compare lender rates, terms, fees, and conditions. Know how much you can afford to spend and stick to your budget. Personal loans can make your land purchasing goals come true.