Loan EMI

Step-by-Step Guide to Calculate Your Plot Loan EMI

Indians nowadays are aspiring for independent houses rather than residential complexes. This means that most people are planning to own a plot of land at first and then construct their dream house on it. In order to meet the financing needs of such individuals, lenders are providing a distinct credit facility known as a plot loan.

However, before making a purchase, there are certain factors one must consider like the amount of loan, EMI amount, tenure, etc. In this article, we have discussed the plot loan EMI calculator, benefits, documents required, and more.

What is a plot loan?

A plot loan is a type of credit facility offered by a financial institution or bank solely for the purpose of financing a purchase of a plot of land. This loan is provided mainly for residential purposes, with a typical repayment period of 20 years.

What is meant by a plot loan against property?

A plot loan against property is one of the types of loan against property offered by numerous lenders; it is a secured credit facility to finance the purchase of a plot against another property owned by the borrower as collateral.

The loan against property interest rate usually varies from lender to lender and depends on the risk assessment carried out based on the credit profile of the borrower. It may also vary based on the amount of the loan, tenure, and the property which is kept as collateral.

Note: Nowadays offering a pre-approved loan is a quite common practice among lenders to their existing customers. It is wise for a customer to take this as an advantage while opting for a loan against property, as accepting such offers often quickens and speeds up the loan approval process.

What are the plot loan eligibility criteria?

Listed below are some of the generalized eligibility criteria of an individual applying for a plot loan.

  • The individual has to be an Indian resident.
  • The age of the individual should be between 18 years to 65 years.
  • The individual must be either salaried or self-employed i.e. must have a stable source of income.

Steps to calculate plot loan EMI

The following are the steps involved in determining the EMI amount of a plot loan:

Step 1: Firstly, navigate to an online plot loan calculator and enter the principal amount.

Step 2: Choose the tenure or duration of the loan (in years or months as specified).

Step 3: Enter the interest rate that the lender is charging for that deal.

Step 4: Hit on the calculate option to get the results.

Step 5: It will show the amount of monthly EMI, amount of principal, and total interest payable.

Benefits of using a plot loan EMI calculator

Listed below are some of the benefits of using a plot loan EMI calculator:

  • Using an EMI calculator helps one to get an idea regarding the monthly EMI payments.
  • One can get an idea regarding the affordability of the loan i.e. the amount of principal that one can borrow with ease.
  • It provides clarity regarding the cash flows and helps in planning the finances so that the construction of the house property does not face any sort of financial challenges.
  • Using a property loan EMI calculator gets things done within a matter of seconds and makes things simpler, saving time and effort.

Land/plot loan tax benefits

The majority of Indians nowadays are aspiring to own an independent home, therefore availing more and more plot loans. Now, one might think that there are no tax benefits on a plot loan; however, it is a myth.

Tax benefits can be availed if the borrower constructs a house on that plot and tax deductions can be claimed in the year when the construction is completed. Listed below are some of the plot loans against property tax benefits:

  • Deduction under section 80C: This deduction can be availed only on the principal component of the loan up to a maximum of Rs. 1.5 lakh under Section 80C of the Income Tax Act.
  • Reduced pre-construction interest:  A discount is allowed at the beginning of the financial year in which the construction has begun. A pre-construction interest can also be claimed from that same year, which is allowed in five installments.
  • Deduction under section 24: Post completion of the construction of the house property, one becomes eligible for tax benefits on the interest component of the loan. One can avail of a deduction of Rs. 2 lakh under Section 24 of the IT Act; however, the plot loan has to be converted into a home loan in order to avail of this benefit.
  • Interest deduction: As per the national taxation code, one can be eligible for an interest rate deduction if they have purchased the said plot for the purpose of constructing a house.

Plot loan against property documents required

The following are the general documents required for applying for a plot loan against property:

  • Application form signed and filled along with passport-size photographs of the applicant
  • Form 16 copies
  • Proof of identity along with proof of residence
  • Salary slips for the last 3 months
  • Six months’ bank account statement/bank passbook
  • Cheque for loan processing fee

Recently, people in India have been aspiring to purchase a plot either for constructing an independent house or for letting it out as a passive income source; both are great sources of investment as the value of land appreciates over time.

However, the value of land appreciates provided there are certain factors like roads and connectivity, essential amenities, railway stations, airports, etc. Therefore, one must keep these in mind and check loan affordability by using a plot loan EMI calculator in order to make an informed decision.

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