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If you’re planning to purchase a plot of land and build your home, an LIC plot loan can be a suitable financing option. This loan provides the necessary funds to buy a residential plot and offers flexibility in terms of repayment. Understanding the features and benefits of an LIC plot loan will help you make an informed decision, ensuring a smooth process from land purchase to home construction.
What is a Construction Loan?
A construction loan provides the funds needed to build a house or structure on your plot. It covers the costs from the ground up and is disbursed in stages as the construction progresses. During construction, you typically pay only the interest. However, once the building is complete, the loan then converts into a regular home loan, and you start repaying the principal along with the interest.
This loan is ideal for those who want to build on their plot, ensuring you have the necessary funds throughout the construction process.
Difference Between Construction Loan and Home Loan
Although both a construction loan and a home loan help finance your property, they serve different purposes. Below are the key differences between the two:
- Purpose: A construction loan is meant for building a house on a plot, while a home loan is for purchasing a ready-built property.
- Disbursement: In a construction loan, the bank disburses the amount in stages as construction progresses. A home loan is usually disbursed as a lump sum.
- Repayment: You repay a construction loan after the construction is complete. During construction, you pay only the interest. A home loan requires you to start repaying both principal and interest immediately.
- Interest Rates: Construction loans often have slightly higher interest rates compared to home loans due to the added risk involved in construction.
- Loan Tenure: Home loans generally offer a longer tenure than construction loans, making monthly repayments smaller.
Construction Loan Eligibility Calculator
A construction loan eligibility calculator helps you estimate how much loan you can get based on certain criteria. The eligibility for a construction loan is usually similar to that of a home loan. Here are the key factors that are considered:
- Income: Your monthly or annual income plays a significant role in determining your loan eligibility. Higher-income usually means higher loan eligibility.
- Age: Lenders prefer borrowers who are younger, as they can offer a longer repayment tenure.
- Employment Type: Stable employment, whether salaried or self-employed, is crucial. Lenders look at the consistency of your income.
- Credit Score: A higher credit score increases your chances of getting a loan and may also result in better interest rates.
- Existing Liabilities: Any current loans or liabilities you have will impact your loan eligibility. Lenders consider your debt-to-income ratio.
- Property Value: The value of the plot or property you intend to build on affects the loan amount you are eligible for.
Using a construction loan eligibility calculator with these factors can give you a clear idea of how much you can borrow.
LIC Construction Loan Interest Rates
Life Insurance Corporation Housing Finance Ltd. (LIC HFL) offers construction loans with interest rates ranging from 6.90% p.a. to 7.90% p.a., depending on factors such as employment type and credit score. These loans are intended for financing the construction of a house on a plot of land. The repayment period can extend up to 30 years, with the loan amount covering up to 75% of the property’s value.
Here are the specific interest rates based on different borrower categories:
For Salaried and Professional Individuals:
| Loan Amount | Credit Score Above 700 | Credit Score 650-699 | Credit Score 600-649 | Credit Score Below 600 |
|---|---|---|---|---|
| Up to Rs.50 lakh | 6.90% p.a. | 7.10% p.a. | 7.30% p.a. | 7.50% p.a. |
| Rs.50 lakh – Rs.1 crore | 6.90% p.a. | 7.30% p.a. | 7.60% p.a. | 7.70% p.a. |
| Rs.1 crore – Rs.3 crore | 6.90% p.a. | 7.40% p.a. | 7.70% p.a. | 7.70% p.a. |
| Rs.3 crore – Rs.15 crore | 6.90% p.a. | 7.50% p.a. | 7.70% p.a. | 7.80% p.a. |
For Non-Salaried and Non-Professional Individuals:
| Loan Amount | Credit Score Above 700 | Credit Score 650-699 | Credit Score 600-649 | Credit Score Below 600 |
|---|---|---|---|---|
| Up to Rs.50 lakh | 7.00% p.a. | 7.20% p.a. | 7.40% p.a. | 7.60% p.a. |
| Rs.50 lakh – Rs.1 crore | 7.00% p.a. | 7.40% p.a. | 7.70% p.a. | 7.80% p.a. |
| Rs.1 crore – Rs.3 crore | 7.00% p.a. | 7.50% p.a. | 7.80% p.a. | 7.80% p.a. |
| Rs.3 crore – Rs.15 crore | 7.00% p.a. | 7.60% p.a. | 7.80% p.a. | 7.90% p.a. |
For individuals with a credit score below zero, the rates are slightly higher. Specifically, non-salaried and non-professionals face a rate of 7.50% p.a. for loans up to Rs. 50 lakh, whereas salaried and professionals are offered a lower rate of 7.40% p.a.
Conclusion
Applying for a LIC plot loan is a practical choice if you plan to purchase a plot and build your dream home. This loan offers flexible repayment options and competitive interest rates. By understanding the eligibility criteria and loan features, you can make informed decisions that align with your financial goals. Choose an LIC plot loan to simplify the process of turning your plot into a valuable asset.
Get a Free Consultation with Credit Dharma Today! Our team of experts is ready to guide you through the complexities of home loans and ensure you find the best rates tailored to your needs.
Frequently Asked Questions
An LIC plot loan helps you buy a piece of land to build your home.
Salaried, self-employed, and professionals can apply.
You can borrow up to 75% of the plot’s value.
The interest rate ranges from 6.90% to 7.90% per annum, depending on your credit score.
You can repay the loan over a period of up to 30 years.
Yes, usually, you need to start construction within a specific period after getting the loan.
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