Can You Get a Personal Loan to Buy Land?

Buying land can be an exciting step, whether you’re thinking about building a home, purchasing recreational property or making a long-term investment. But land purchases don’t always work the same way as buying a home, especially when it comes to financing.

While many people use different financing methods to buy land, like mortgages or land loans, a personal loan may be another option to consider. In this article, we’ll explore how personal loans work, how land prices compare to typical loan amounts and how to find financing options that work best for you.

Can you use personal loans to buy land?

Personal loans are generally considered fast, flexible loans that can be used for many different expenses, like managing debt, handling unexpected bills or even buying land. In many cases, using a personal loan to buy land can be a faster alternative to traditional mortgages or land loans. Unlike mortgages or land loans, many personal loans are unsecured, meaning you don’t have to use the land itself as collateral to apply for the loan. This means that approval doesn’t depend on the condition, location or development status of the land.

Here are a few other common considerations to know about if you are thinking about using a personal loan to buy land:

• Borrowing limits: Personal loan amounts may be lower than land prices in some markets.
• Interest rates: Rates are often higher than secured loans because the loan isn’t backed by collateral.
• Repayment timing: Payments typically begin shortly after the loan is funded.
• Monthly payments: Fixed repayment terms mean you will have predictable payments (as long as you pay your monthly payment on time, every time).

Personal loans to buy land: How does it work?

Getting a personal loan is a fairly straightforward process. You borrow a lump sum of money up front and then pay it back in fixed monthly installments until the loan is paid in full. To apply for a personal loan, you would first compare rates and terms from lenders. Prequalifying for a personal loan could also help you get an idea of your chances of approval. Prequalifying usually involves a soft credit inquiry, which means there’s no impact on your credit. At OneMain it only takes a few minutes to check for available offers.

Once you find a loan offer that works for your needs, you can apply. Gathering documents ahead of time can help you prepare to submit your application. Documents needed may vary by lender, but lenders typically request documents that confirm your identity, residence and income. If your application gets approved, you will have access to a lump sum of money you can use to buy land. You typically will be able to get money relatively quickly once you’re approved. For example, with a OneMain personal loan, you could get funds as soon as 1 hour after loan closing.

When does it make sense to use a personal loan to buy land?

A personal loan is just one of several ways people finance land. In some situations, it may offer more flexibility or convenience than other loan types. Here are some reasons why it may make sense to use a personal loan to buy land:

Faster access to funds

If you need funds relatively quickly, a personal loan may be appealing. These loans often have simpler application and funding processes than property-based loans, which can be helpful when timing is important or when a seller expects a fast closing.

Payments fit in your monthly budget

This approach may also be a reasonable fit if you’re comfortable with the interest rate and repayment terms, and the monthly payment works within your budget.

The land price fits within common personal loan limits

Personal loans are commonly used for smaller or lower priced land purchases. Many personal loan limits fall in the range of $30,000 to $50,000, which may align with the cost of certain lots or parcels.¹ In these cases, the simplicity of a personal loan can make it easier to move forward.

When using a personal loan to buy land may not make sense

While personal loans can be useful in some scenarios, they aren’t always the right fit for every land purchase.

The land price exceeds typical loan limits

Larger or more expensive land purchases may exceed what a personal loan can reasonably cover. In those cases, other financing options may provide access to higher borrowing amounts.

You need a longer repayment period

Personal loans typically have shorter repayment periods than land loans or mortgages. If keeping monthly payments lower depends on spreading payments over a longer time frame, a personal loan may not provide enough flexibility.

You expect to take on additional financing later

If you plan to apply for more financing down the line, such as a construction loan, taking on a personal loan first could add complexity. Managing multiple loans at the same time may affect your budget and how future lenders view your overall financial picture.

Alternatives to using personal loans for buying land

If a personal loan doesn’t feel like the right fit, there are other financing options commonly used for land purchases. Each option comes with its own requirements and approval process.

Land loans

Land loans use the land itself as collateral and generally fall into three categories:

• Raw land loans for undeveloped property without utilities or road access
• Unimproved land loans for land with limited utility access
• Improved land loans for property with utilities and road access already in place

Home equity loans and HELOCs

Homeowners with available equity may consider a home equity loan or a home equity line of credit (HELOC). A home equity loan (also called a second mortgage) is a lump sum of money borrowed against the equity in your home (the market value of your home minus the amount you still owe on your mortgage), while a HELOC is a home equity line of credit that allows you to borrow against the equity of your home. These loans are tied to your existing home and involve different repayment structures and risk considerations.

Construction loans

If you plan to build on the land in the near future, a construction loan may make sense. These loans can sometimes cover both land and building costs, but they often involve more detailed documentation and approval requirements.

Understanding your lending options

Using a personal loan to buy land is possible, but it isn’t a one-size-fits-all solution. Factors like land price, loan terms, monthly payments and future plans all play a role in deciding which option may fit best.

OneMain offers personal loans from $1,500 to $30,000, which may work for smaller land purchases in some situations. Taking time to compare your options and understand how different loans work can help you move forward with more confidence.

Sources

https://www.experian.com/blogs/ask-experian/how-to-get-a-land-loan/