Plot Loan Interest Rate
Lenders usually provide Plot Loans at floating interest rates. Many lenders also determine the interest rate for loan applicants based on factors like credit score, loan amount, monthly income, occupation profile, employer’s profile, etc. of the loan applicants. The plot loan interest rates are usually similar or a bit higher than the interest rates of regular home loans.
Loan-to-Value Ratio
LTV ratio of a plot is the proportion of the property’s value that can be financed through the loan. Lenders usually offer LTV ratio of up to 80% for Plot Loans. However, the final LTV ratio set for an applicant would depend on the credit risk assessment undertaken by the lender. Factors considered while undertaking credit risk assessment include the credit profile and repayment capacity of the borrower, market value of the property, location of the plot (within or outside city limits), etc.
Loan Tenure
Most lenders offer Plot Loans for tenures ranging between 10 to 20 years. Lenders would usually consider the repayment capacity of an applicant while setting their loan tenure. Note that home loan lenders usually require their applicants to maintain their monthly EMI contribution, including that of their proposed loan, within 50-60% of their net monthly income. Plot loan applicants can use the home loan EMI calculator to determine the optimum tenures and EMIs for their plot loans based on their repayment capacity.
Tax Benefits on Plot Loan
Borrowers are not eligible for availing income tax deductions on the repayment of principal and interest components of the plot loan. However, such borrowers would be eligible to claim tax deductions on the repayment of home loan availed for constructing the residential property on the plot purchased through plot loan.
Availability of Balance Transfer Facility
Existing plot loan borrowers can exercise the home loan balance transfer facility to transfer their outstanding plot loan to other lenders at lower interest rates and thereby, reduce their interest cost. However, the approval of the balance transfer application would primarily depend on the credit risk assessment of the applicant by the new lender.
Processing Fees and Prepayment Charges
The processing fees charged by home loan lenders for availing a plot loan ranges from 0.25% to 1.50% of the total loan amount. RBI has barred lenders from charging prepayment fees on floating rate loans. However, lenders are free to charge or waive off prepayment fees on fixed rate loans.
