A home loan is an umbrella term that covers different types of loans based on the end-use of the loan amount. These include loans such as property loans, home renovation loans, plot loans, bridge loans, home construction loans, and so on. Thus, it is evident that a plot loan is a type of home loan. However, despite the similarities between a home loan and a plot loan, there exist a few minor differences that you must be aware of before opting for a plot loan or a home loan.
Difference between Plot Loan and Home Loan
The difference betweenplot loans and home loans are as follows:
A plot loan allows you to buy a plot, a resale plot, or a plot through direct allotment. On the contrary, a housing loan can be used to purchase any property as there is no restriction on property type. For example, you can use a home loan to buy an apartment or a bungalow from an approved builder.
While opting for plot loans, you must keep in mind its location. This is so because it is mandatory that the plot should be situated within the jurisdiction of a municipal corporation. Also, it must not be located on the outskirts of a city. However, there are no such restrictions while opting for a home loan.
Financial institutes often charge a higher interest rate for a plot loan than a home loan.
Unlike housing loans, you cannot enjoy an income tax benefit on plot loans if you purchase them only for investment purposes without building a house on it. Also, the tax benefit can only be claimed during construction and not after construction.
However, even though there are several tax benefits for a housing loan, the eligibility criteria to qualify are extremely strict. Additionally, if there are co-applicants for a housing loan and both are working, they can claim tax deductions separately.
You can enjoy a higher loan-to-value (LTV) ratio on a housing loan, up to 90%. However, for plot loans, the LTV is only up to 70%.
The loan tenure offered for a plot loan is often longer than compared of a housing loan.
Eligibility Criteria of Plot Loan and Home Loan
Eligibility criteria for plot loans are as follows:
Age: 18 to 65 years
Citizenship: Indian
CIBIL score: Preferably 750 or above
Employment status: Must be a salaried or a self-employed individual
Eligibility criteria for housing loans:
Age:
For salaried individuals: 23 to 62 years
For self-employed individuals: 25 to 70 years
Citizenship: Indian
CIBIL score: Preferably more than 750
Work experience: A minimum of 3 years
Business vintage: A minimum of 5 years
How to Apply for a Home Loan and Plot Loan
The steps to apply for a plot loan and home loan are similar, and are as follows:
Step 1: Go to the home page of a financial institution.
Step 2: Move to the “Home Loan” section.
Step 3: Click on the “Apply now” button.
Step 4: An application form will appear where you will be required to fill in the required details.
Step 5: Scan and upload the documents that are needed.
Step 6: Go through the application form to check for error and submit it.
You can also keep the documents scanned before beginning the application process to prevent errors during the last-minute rush.
Documents Required for Plot Loan and Home Loan
Documents required for plot loans are as follows:
Age proof such as voter card or Aadhaar card.
Address proof such as utility bills.
Income proof such as ITRs and salary slips or business license details.
Documents related to the plot.
Approved layouts of the plot.
Documents required for a home loan are as follows:
KYC documents such as PAN card, Aadhaar card, driving license, voter ID card, and valid passport.
Income proof such as
For salaried individuals: salary slips of last three months, ITR of previous two years or Form 16.
For self-employed individuals: ITR certificate of last three years, Business Licence Details with Address Proof, previous three years of profit and loss statement, Audited balance sheet, and TDS certificate.
Address proof documents such as utility bills, rental agreements, etc.
Property papers of the mortgaged property.
Now that you are aware of the differences between a housing loan and a plot loan, you must wisely choose the one that would serve your purpose. Additionally, you can go through their features from the official website of different financial institutions that would enable you to make the right choice.