I have land that is paid for that I would like to use as collateral
for a personal loan. There are 4 different properties, 82 acres,
54 acres, 25 acres, and 20 acres. Can I use this as
security for a personal loan of $150,000? Who are some
lenders I may contact?

Penny:

You can almost always get a loan with adequate collateral. The problem is that this might not be the best way to go. Looking at a loan request from the point of view of collateral is not the way mainstream lenders look at requests.


What I am trying to say is the following:

You can probably get a loan based solely on collateral, and you will find lenders willing to lend you the money. None of these lenders would be commercial banks with good credit policies. Banks do no lend on collateral. Other financing institutions do, but they will charge you an interest rate in the double digits. This is an option you can take, but take it after you fully understand where those lenders are coming from. Those lenders are making their decision based solely in the value of the land.

On the other hand, you can approach a lender with an idea of what you want to use the loan for and how you are going to repay it. Remember that the banker will be interested in repayment capability. The collateral is just the secondary or tertiary source of repayment.

If you still want to pursue a collateral based loan, then look for those companies offering “hard money”, “land loans”. If you are looking for a competitive commercial loan then look for your neighborhood community bank.

Hope this helps.

Penny,

How far did you go with this? I have been trying to get a loan using my land as collateral, but the banks will not accept it. Did you find any resolution?

Lindy:

Banks are called "cash flow lenders". The cash flow has to be there to repay the loan. Land without a firm commitment from an acceptable third party is considered speculative. A "firm take-out" commitment is needed to mitigate this. In addition, terms for land are usually limited to a couple of years at most.