Land-Backed Loans

If a person has a bad credit history or high debt burden, but urgently needs to get a bank loan, they can provide collateral. For example, this can be a land plot. In this case, the probability of loan approval will be much higher, as the lender will be confident that the debt will be settled. Even if the person encounters an unforeseen situation and lacks money for monthly payments. We will discuss the features of a land-backed loan, who can apply for such a loan, and what requirements banks impose on land plots.

Features of a Land-Backed Loan

A land-backed loan differs somewhat from lending secured by other real estate. This type of loan has its own characteristics, among which we can highlight the following:

• a small loan amount — banks are willing to approve no more than 50% of the appraised value of the land plot;
• a small number of offers — far from all banks issue land-backed loans;
• optional property insurance — meanwhile, life and health insurance significantly increases the likelihood of application approval;
• the ability to get a large amount for a long term with a minimum interest rate;
• the opportunity to get a loan even with a bad credit history.

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Property-secured loan at T-Bank

Term: 15 years

Interest rate: 15,9

Minimum amount: 200000 ₽

Maximum amount: 30000000 ₽

Age: 18

Decision: From 1 min

Details

Who can apply for a land-backed loan and what is required for this?

When issuing a loan secured by a land plot, the bank is guaranteed that the client's debt will be repaid in any case. For this reason, the requirements for borrowers are milder than when approving an unsecured loan. Usually, they are as follows:

• hold citizenship of the Russian Federation;
• having permanent registration, a place of actual residence, and a place of work in the region where the land plot is located;
• age 18 and older;
• having a work experience at the current place of employment from 3 months, and a total experience of at least 1 year;
• having a monthly income sufficient to make payments.

As for documents, usually only a passport of a citizen of the Russian Federation is enough to apply for a land-secured loan. If you want to increase your chances of a positive decision, you can also provide certificates confirming your income and place of work.
And banks usually request the documents for the collateral property themselves.

What requirements do banks impose on a land plot?

For a bank to agree to accept a land plot as collateral, the property must meet certain requirements. The main condition is the liquidity of the land plot, that is, its demand in the real estate market. The remaining requirements may vary — it all depends on which particular bank you apply to.
Nevertheless, we can highlight the general criteria that a land plot must meet:

• short distance from large settlements;
• developed transport and social infrastructure;
• no problems with gas and electricity supply;
• area of the land plot of at least 6 sotkas;
• short distance from the highway;
• no problems with access to the plot.

Even if your land plot meets all these requirements, we recommend checking the criteria in advance on the bank's website or by calling the hot line.
In addition to meeting the requirements listed above, the land plot must not be encumbered. By this we mean the following:

1. The land plot must not be under arrest for any debts. For example, for non-payment of loans, taxes, alimony, and so on.
2. The land plot must not be pledged to another credit organization. This can happen if you bought the land with a mortgage and have not yet paid it off.
3. The land plot must not be leased under an annuity agreement. And so on.

How to get a land-secured loan: step-by-step guide

Getting a loan secured by a land plot is not difficult. Usually, this requires:

1. Studying offers from different banks. In particular, we recommend paying attention to the loan amount and term, minimum and maximum interest rates, various commissions, the amount of the penalty for breach of contract terms, as well as requirements for borrowers and collateral property.
2. Gathering all necessary documents in advance. We recommend familiarizing yourself with their list beforehand. You can do this on the bank's official website or by calling the hot line.
3. Applying for a loan. This can be done either at a bank branch or online. To apply, you need to fill out a short application form, indicating your surname, first and middle name, date of birth, passport details, registration and actual residence addresses, and information about your work and income.
4. In case of a positive decision on the application, sign the loan agreement and, if necessary, arrange real estate and life and health insurance.
5. Registering the transaction with Rosreestr.

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Offer

Min. amount

Max. amount

Rate

Term

Rating

Property-secured loan at BJF Bank

Min. amount

5 000 000 ₽

Max. amount

20 000 000 ₽

Rate

From 9.9 %

Term

up to 25 years

Rating

3.5

Real estate-secured loan for any purpose from Alfa-Bank

Min. amount

1 000 000 ₽

Max. amount

15 000 000 ₽

Rate

From 13.5 %

Term

up to 10 years

Rating

2.5

Property-secured loan at T-Bank

Min. amount

200 000 ₽

Max. amount

30 000 000 ₽

Rate

From 15.9 %

Term

up to 15 years

Rating

2.5

Conclusion

To summarize. Getting a loan secured by a land plot is not difficult. However, you need to be prepared for the fact that far from every bank is ready to issue a loan against land. It is also worth considering that the loan amount will be significantly less than in the case of a loan secured by an apartment or a house. Thus, banks are ready to issue no more than 50% of the appraised value of the land. At the same time, the loan amount will be significantly larger if there is a house on the land plot.