Difference between Home Loan and Plot Loan

Difference between Home Loan and Plot Loan

The concept of loans began after people realised the exploitation by local money lenders and their acts of taking away more than giving. The problem in local money lenders and the system of informal lending had made people completely helpless. Borrowers had no other option than to reply to these local lenders then. For different properties such as agricultural or commercial land and residential, people needed a formally regularised process of borrowing. That’s where banks stepped in to support.

Banks spread their ways into rural and urban areas by opening different branches. Banks supervised and controlled by the government directly became the best way out for people to borrow. Banks officially lent loans through valid paperwork and transparent terms and conditions. one of the most significant loans provided by banks is home loans. Home loans are the most extensive support provided to potential homebuyers. Home loans are given under contractual terms in exchange for a tenured payment and an interest charged on the amount to be paid. Banks offer home loans for the property, constructed or semi constructed or renovated houses or residential properties. Home Loans are provided under the Pradhan Mantri Awas Yojana Scheme, and banks had their bank loan offers.

Home loans are usually given based on your credit score. Once they judge your credit score, do they find you credible for a home loan. In comparison to these plots, loans are different. Plot loans are given out for buying out the land or property on which one wishes to build a house or project. Plot loans are usually given to buying plots of lands to people whether they are salaried or self-employed. Usually, those who wish to buy a land plot have an excellent credit score and repayment record. A person usually buys the ground or plot to develop a house for a future investment or issues. There are a few factors that determine the clearing of the plot land. A few of those factors are -

• Non-agricultural land - it is a strict factor necessary for a plot loan. The plot loan will be given only for non-agricultural land.
• Residential property - the plot land must be utilized only for residential purposes ways to either buy a plot vacant for the plot loan is through direct allotment in a residential project or allotment in a resale project.
• Within the limits of the city - the land must be within the limits of city and municipality limits, but if the development authority beyond the municipality limits allots the land.
• Within 2 years of construction - it is compulsory to construct a house within 2 years from loan taking.
• Percentage of the loan - usually a 60% - 70% loan amount is given to a loan taker, and the rest has to be paid by the borrower down payment.
• Equitable mortgage - usually, a plot loan is given as an equitable mortgage. The title deeds of land already existing with the borrower are physically deposited by the borrower with the bank.

Differences between Home Loans and Plot Loans

1. Purpose - the purpose of the home loans is to buy a house that is either ready for possession or to is made, whereas plot loans are taken to purchase the land or plot to develop a residential project. 
2. Tax deduction - Home loans takers are given tax benefits, whereas plot loans takers get no tax benefits 
3. Tenure - The tenure for the loan repayment in home loans is 30 years, whereas, for plot loans, the loan repayment tenure is usually 15 years