Key insights:
- You may be able to use a personal loan to buy land, depending on the lender's policies and how much you can borrow
- Getting a personal loan to buy land involves a few core steps, from choosing your land type to submitting your application
- Personal loans offer quick funding and fewer fees, but often come with higher interest rates and shorter terms than property-backed loans
- Alternatives like land loans, home equity loans, USDA loans and seller financing may better suit certain buyers
Interested in buying a plot of land? Maybe you're envisioning a future home, a small farm or a long-term investment. Whatever the dream, you'll likely need a way to pay for it, and there are more options than you might think.
Different financing routes can help you purchase land, potentially even a personal loan. Each option comes with its own perks and trade-offs, so it pays to understand how they compare.
Let’s explore how to get a loan to buy land, the benefits and drawbacks of using a personal loan for a land purchase and a few alternatives worth considering.
Can you use a personal loan to buy land?
Yes, you may be able to use a personal loan to buy land, though it depends on the lender's loan usage policies. For example, you may not be allowed to use a personal loan to buy land for business purposes. It’s a good idea to check with your lender first to make sure you can use the loan the way you intend.
A personal loan may be more appealing than a mortgage because a personal loan is typically unsecured. That means the lender doesn't require the land you're buying to act as collateral.
How to get a personal loan for land in 5 steps
A little preparation goes a long way. Knowing what you need ahead of time can make the loan application smoother and help you avoid surprises. Here's how to approach it, step by step.
Step 1: Determine the type of land you want to buy
Start by clarifying what kind of land you have in mind. Agricultural land for a business venture looks very different from residential land where you plan to build a home. Make sure your intended use for the land abides by the lender’s rules. Knowing your purpose helps you map out a detailed plan for the money, which lenders typically ask to see before approving your loan.
Step 2: Research and compare lenders
Comparing lenders before you apply could help you find the right fit for your needs. A little research now may save you money and stress later. As you shop around, consider the following:
- Interest rate: This should be a top consideration, as it shapes the total cost of your loan.
- Loan amount: Personal loans often have lower borrowing amounts than mortgages and other types of real estate financing. Make sure your lender can offer you a loan large enough for your needs.
- Repayment timeline: Your repayment timeline, or loan term, determines your monthly payment and typically ranges from 1 to 7 years. Pick a timeline that fits your budget comfortably.
- Fees: Compare origination fees, late fees and other charges across lenders.
- Reviews and ratings: Look for online reviews to gauge a lender's customer service and reputation.
Step 3: Check your eligibility
Before you apply, it's wise to check your credit score. A strong credit profile could improve your eligibility and may lead to a more favorable interest rate. Lenders also weigh other elements of your creditworthiness, such as your debt-to-income ratio, credit mix and payment history, when reviewing your application.
Depending on the lender, you also may be able to see if you prequalify for the loan before applying. For example, Citi lets you check your rate without impacting your credit score1.
Step 4: Gather and prepare your documents
Once you've done your research and feel comfortable moving forward, it's time to get organized. You'll likely need the following information when applying for a personal loan:
- A government-issued ID, such as a driver's license or passport
- Your Social Security number
- Proof of income, like pay stubs or tax returns
- Proof of address, such as a utility bill or rental agreement
Step 5: Complete and submit the application
You can usually apply for a personal loan online through your bank or lender's website. Take your time to answer each question, ensuring you follow all directions and upload any requested documents. Before you hit “submit,” review the full application to check for any errors.
Once your personal loan is approved, you may receive the funds within a few business days.
Pros and cons of using a personal loan for land purchase
A personal loan for a land purchase may come with some advantages, along with a few trade-offs worth considering. Here's a closer look at both sides.
Benefits
- Fewer fees: Personal loans may come with fewer fees than traditional land loans, with no closing costs or appraisal fees.
- Quick funding: Personal loans can often be funded within 1 or 2 days, letting you move fast on a desirable plot.
- No lien on your land: Because personal loans are typically unsecured, the lender can’t take your land if you default.
Drawbacks
- Higher interest rates: Personal loan interest rates tend to be higher than those for property-backed loans.
- Shorter repayment timelines: You may have only 7 years or less to repay the funds, which could result in higher monthly payments.
Alternatives to using a personal loan to buy land
If a personal loan doesn't quite fit your needs, you have other ways to finance a land purchase. Here are 4 alternatives worth exploring.
Land loan
A land loan is a type of financing made specifically for buying a plot of land. Land loans are secured by the land alone, so lenders may view these as higher risk and impose stricter requirements. There are 3 common types of land loans:
- Raw land loan: Covers undeveloped land with no utilities, roads or improvements
- Unimproved land loan: Covers land with some basic features but missing key utilities or access
- Improved land loan: Covers land that already has road access, water and electricity
Home equity loan
A home equity loan lets homeowners borrow against the equity in their current home. You could use those funds to purchase land. This option often offers a lower interest rate than an unsecured personal loan, since your home backs the loan. Keep in mind that your home serves as collateral, which means the lender could foreclose on it if you default.
USDA loan
A loan offered through the U.S. Department of Agriculture's Rural Development program may help you buy land in an eligible rural area where you intend to live. These programs aim to support homeownership and development across rural America. Eligibility depends on the location and how you plan to use the land.
Seller financing
With seller financing, the seller acts as your lender. You make payments directly to them based on terms you both agree on, rather than going through a bank. This route may offer more flexibility, though terms vary widely from one seller to the next.
Personal Loan for your next land purchase
Buying land is a big step, and the right financing makes it more achievable. A personal loan can be a flexible way to fund your purchase, with quick funding, fewer fees and no need to put your land up as collateral. Still, it's worth weighing your options. Comparing personal loans to land loans, home equity loans, USDA loans and seller financing can help you choose a financing option that aligns with your budget and goals.
If a personal loan is the right fit for you, Citi can help. Citi offers personal loans up to $30,000, and up to $50,000 for current Citi customers2. Once approved, you may receive your funds directly into an existing Citi® bank account as soon as the same business day. You can also enjoy a discount when you enroll in automatic payments.
Ready to turn that plot of land into reality? Explore Citi® Personal Loans today and take the next step.
Loans to buy land FAQs
How hard is it to borrow money to buy land?
The type of loan you’re seeking, the type of land you want to buy and your creditworthiness can all affect how hard it is to borrow money to buy land. Comparing lenders and preparing a clear plan could improve your chances.
Do you have to put 20% down on land?
You don’t always need to make a down payment for land. The amount you put down depends on the lender and the type of loan you choose. Some land loans may require a larger upfront payment due to the added risk, while a personal loan typically doesn't require any money down.
What is the best type of loan to buy land?
The right loan depends on your situation. A personal loan may suit buyers who want quick funding without offering collateral. A land loan or home equity loan may work better for larger purchases, while a USDA loan may be a better option for those buying in eligible rural areas. Compare your options to find the right match.
This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
1To check for offers you may qualify for, Citi conducts a soft credit inquiry. If you are presented with an offer and choose to proceed with the application process, Citi will conduct a hard credit inquiry which may have an impact on your credit score and/or the loan amount offered to you.
2Citi® Personal Loan proceeds cannot be used to pay for post-secondary education expenses or for business purposes. Eligibility for a loan amount of up to $50,000 is exclusively limited to customers holding Citi credit cards or eligible Citi checking and savings accounts. Loan approval is subject to Citi's standard credit underwriting criteria and other terms and conditions.
