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Personal loans to buy land in Canada

See how a personal loan can help you finance your new piece of land.

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By

Kellye Guinan

&

Emma Balmforth

Updated

Fact checked

When purchasing a house or a piece of land, it’s common to head to the bank to discuss mortgage rates. However, getting a land mortgage isn’t the only way to finance your new land. Personal loans can provide competitive rates with much shorter loan terms than mortgages, however getting a loan for your land purchase is generally more difficult than applying for a mortgage — and it’s likely to be more expensive in the long run.

Compare personal loans you can use to buy land

1 - 6 of 6
Name Product Interest Rate Loan Amount Loan Term Requirements
Loans Canada Personal Loan
Loans Canada Personal Loan
6.99% - 46.96%
$300 - $50,000
4 - 60 months
Requirements: min. credit score 300
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Spring Financial Personal Loan
Spring Financial Personal Loan
9.99% - 46.96%
$500 - $35,000
6 - 60 months
Requirements: min. income $1,800/month, 3+ months employed, min. credit score 500
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View details
SkyCap Financial Personal Loan
SkyCap Financial Personal Loan
19.99% - 39.99%
$500 - $15,000
9 - 60 months
Requirements: min. income $3,333/month, full time employment/pension, min. credit score 600, no bankruptcy
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LoanConnect Personal Loan
LoanConnect Personal Loan
6.99% - 46.96%
$100 - $50,000
3 - 120 months
Requirements: min. credit score 300
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View details
Mogo Personal Loan
Mogo Personal Loan
9.90% - 46.96%
$200 - $35,000
6 - 60 months
Requirements: min. income $13,000/year, min. credit score 500
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View details
Fairstone Secured Personal Loan
Fairstone Secured Personal Loan
19.99% - 24.49%
$5,000 - $50,000
36 - 120 months
Requirements: must be a homeowner, min. credit score 560
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How can I use a personal loan to buy land?

Some lenders allow you to apply for and use a personal loan to buy land.

  • With an unsecured personal loan, you won’t be required to provide collateral. It’s different from a mortgage in that a mortgage is secured by the property you’re purchasing, whereas buying raw or undeveloped land doesn’t typically include a home you can use as collateral — often resulting in higher rates to compensate for the higher risk to the lender.
  • A secured personal loan could also be used to pay for land, however it is less likely the lender will accept the land as collateral since it’s a higher risk asset to seize. You may have to provide another piece of collateral such as a vehicle or some equity in your current home. Interest rates for secured loans tend to be more competitive than unsecured loans since they’re backed by collateral.

Not all lenders will offer personal loans that can be used to buy land, however many online lenders are less strict about the uses of a personal loan, which means as long as you make your repayments, you can generally use it for any legitimate purpose.

How easy is it to get a personal loan to buy land?

This will depend on what you plan on doing with your land once you’ve purchased it.

  • It’s usually easier to borrow money for land that you plan to build a home or business on than it is to buy raw or undeveloped land that won’t be improved on.
  • How much land you want to buy will also affect whether you can easily get a loan.
  • The type of development you want to do on the land will affect if you can get a loan, as well as any city or municipal regulations and zoning laws.

You can improve your chances of approval for a personal loan by going into the process with a solid plan and a specific piece of land in mind. If you plan to build a residence on the property, you will likely further increase your chances of lender approval, however they may require that you provide the land and home as collateral. Buying land for unknown future uses can result in a denial on your loan request.

4 steps to take before getting a personal loan to buy land

couple in grass - image

Unlike a mortgage, getting a personal loan to buy land will likely depend on the piece of property you intend to purchase. To convince a lender that you won’t default on the loan, here’s a few important steps to take before contacting potential lenders.

1. Know what land you’d like to buy.
Before you contact a lender, have a specific piece of land in mind. The lender may want to know what you’ll be doing with the land, and going to a lender without knowing the land itself can result in a rejection.

2. Know the zoning regulations, easements and improvements. City and municipal zoning laws play a big part in what you can and can’t do with your land. For instance, you might not be able to legally start a farm if the area is zoned residential, or you may not be able to build the size or type of house you’d like.

Similarly, easements — or the right for you to use someone else’s land — and planned improvements for sewage, electricity and other utilities could prevent you from doing what you’d like once you buy the property.

3. Contact the seller to make an offer.
Once you’ve done your research and are ready to buy, contact the seller yourself or through a real estate agent. Prepare to ask for an exclusive buying period while you pursue financing — otherwise, the owner could sell the land to someone else before you’re approved for a loan.

4. Develop a plan for the property.
Prepare a detailed plan for your property, including estimates of costs and a timeline for building on the land. Your job is to convince the lender you won’t default, and showing them your ideas, associated costs and estimated timing is a solid way to help secure your financing.

Types of land loans

There are a variety of different ways to finance your new land. It’s important to compare your options since some are more affordable than others.

  • Personal loan. While you can use a personal loan to buy land, it’s likely one of the most expensive options. Lenders will typically charge high interest rates and fees since borrowing to purchase vacant land is seen as high risk. If you opt for a secured loan, your land could be used as collateral, however vacant land can be hard for a lender to sell on should you default on your loan payments and have your land repossessed.
  • Land title loan. These types of loans are similar to home equity loans or lines of credit. You will use your new land as collateral to secure the line of credit. Lenders may be skeptical to give access to this type of loan since they can be hard to pay off. If your land is located in a rural or remote area and is high risk, a lender may not approve you for this type of financing.
  • Land mortgage. These types of mortgages are similar to regular mortgages that you would get when you purchase a house, however these mortgages are designed for vacant land. Banks and providers may again be skeptical to provide these types of mortgages since your land could be high risk due to its location or lack of amenities. On the plus side, mortgages tend to have competitive rates.
  • Rural property mortgage. If you’re looking to purchase land in a remote or rural location, choosing a lender who specializes in offering rural property mortgages may be the way to go. They’ll have plenty of experience dealing with the high risk involved with this type of financing, which may help you secure the funding you need faster.

Learn more about investment property loans

Where can I get a personal loan to buy land?

You can usually get loans from:

  • Banks. If you’ve been with your bank for a long time and have a proven and positive track record, your bank may be willing to lend you a personal loan to purchase land. Banks can take a while to process personal loans, however they usually come with competitive rates and fees.
  • Credit unions. A credit union loan is a suitable option since the banker likely knows the area. They’re more likely to work with you when your plan involves developing your land or building a house on it. If you’re already a member of the credit union, they will be familiar with your banking history, which will likely help too.
  • Online lenders. Online lenders tend to have less strict criteria when it comes to loans — and this usually extends to loan uses as well. These lenders may be more likely to give out personal loans for a variety of different uses, including purchasing land. With competitive rates and terms, an online lender is definitely worth comparing.
  • Owner financing. This is a seller-to-buyer option through which you agree to pay the person selling the land in installments, rather than go through a secondary lender. Since you’re setting up a promissory note containing the various elements of a purchase — interest rate, repayments, what happens in a default, terms — it’s likely that you’ll need legal help when pursuing this type of loan.
  • Farm loans. If you plan on starting a farm, a loan through the CALA program may be an option to consider. Known as the Canadian Agricultural Loans Act, it’s possible to borrow loans up to $500,000, and sometimes much higher. You’ll need to go in with a solid plan if you’re going to take this route.

Example: Joao buys land on Newfoundland

Joao has been eyeing a beautiful forested piece of land in Northern Newfoundland for a few months. It’s on the market for $75,000.00 and Joao has been saving and now has $50,000.00. He decides that in order to get the land, he will take out a personal loan. Although he could try to take out a mortgage at a lower rate, he doesn’t think he will be approved since the land floods occasionally. Joao heads online to compare lenders and finds one that will offer him the full amount of $25,000.00 for a low rate of 5.50% APR. He offers up his jeep as collateral to secure the loan, since the three year old jeep is worth approximately $27,000.00. Joao will have 5 years to pay back the loan in full, and with low monthly repayments of $477.53, he knows he will be able to do it.

Cost of land$75,000.00
Loan typeSecured personal loan
Loan amount$25,000.00
Interest rate (APR)5.50%
Loan term5 years
Additional feesOrigination fee of 3% ($750.00), no appraisal fee.
Monthly payment$477.53
Total loan cost$29,401.74

*The information in this example, including rates, fees and terms, is provided as a representative transaction. The actual cost of the product may vary depending on the retailer, the product specs and other factors.

Cautions to consider when financing a land purchase

  • It can be difficult to get financing. Since raw land is hard to sell if you default on your loan, lenders are often less likely to finance your purchase without proof of a solid plan.
  • A high down payment may be required. Some types of loans may require high down payments. Be prepared to put down 20% of your land cost.
  • Good credit is required. Since a lender is likely taking a big risk in financing your land, you’ll need good to excellent credit for most land purchases. Lenders want to be sure you’re able to handle your money and make timely payments before they fund your loan.
  • You’ll need to know the area. If you don’t know the area, easements, property values and geographic concerns, you might not be prepared for any potential damage or foreseeable issues on your property. Do your research before you start the buying process so that you don’t face an expensive surprise in the future.

Tips for purchasing land

You have two main factors to consider when purchasing land:

  • When to purchase. There’s no best season to purchase land, but many people take their land off the market during fall or winter, which could result in fewer properties available for purchase. For the most options and possibly lower prices, compare values across all seasons to see how they fluctuate in your local market.
  • What to purchase. When narrowing down the type of land you want to purchase, you’ll need to figure out what you plan on using it for. If you plan on building a house, it’s better to find property with improvements rather than raw land to avoid incurring the extra costs of installing utilities. In addition, a bigger selection of land may be available in the spring and summer months since more sellers tend to put their land on the market during these seasons.

Bottom line

If you’re considering buying a piece of property, a personal loan is a viable option next to traditional land mortgages. You could face more work in the financing process than you might have expected, however, a land purchase can be a great asset to add to your financial portfolio. If you go to a lender knowing exactly what you need, you’ll have a better chance of qualifying for a loan.

Frequently asked questions

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