Buying land with a credit card is possible at times, but surprisingly, this isn't always the case. Very few websites will sell land and let the buyer pay with a credit card. It's not because your credit is no good to them, but developing a system that allows it can be tough and expensive for the seller. There are also some things the buyer should consider before using a credit card.
Choosing Between Buying in Full or Financing
Is your plan to buy this land in full or finance it from the land company selling it? Suppose you have found some land that you can pay for with a credit card, and the cost is around $5k. Ask yourself, will using the credit card make sense, or would using the company's financing option be better?
First, if you are using a credit card, you will make payments anyway, but you will be paying an APR which can sometimes be around 30% interest or so. If you only make the minimum credit card payments over a long period, you can end up paying $2k on top of it or even more for the loan. Yes, you bought the land in full, you own the deed, but you're still making payments.
So, if the land website has financing, compare these APR rates first. Sites like ours, LandZero, have rates as low as 1%, and for longer terms, they still stay extremely low. Some other companies are higher, so look at the options and decide which is smarter. Using financing from a company like ours can save you significant amounts of money while giving you time to pay off the land. Additionally, you can still use a credit card, but you would just be making small payments each time you can pay off without interest on the credit card. It would be similar to making payments on a credit card, but the interest on top would be significantly different.
The Impact of Non-Payment Penalties
Does the company contact credit agencies if there are payment issues? Chances are they don't, but if they want a credit check upfront, they might. We do know some more expensive land sellers where they do secured loans and work with credit agencies. So if things get rough and you can't pay for the land, you could wreck your credit in an unfortunate situation or even lose something. We don't contact credit agencies, so if you default, it is a loss of money but it wouldn't affect your credit score. If you have awful credit already, we still give you the land agreement, we just ask that you pay on time.
Credit card companies can be very harsh for a late payment. You can get charged a late fee, a ding on your credit, and it can start adding up fast in rough times. However, a land selling site like ours, where you end up financing, will not report to credit agencies. For one, we own the land outright and approve everyone willing to pay off the land over time. Yes, it ties up our money, most would like the full amount, even us, but it's a service to our customers.
The worst part of our business is dealing with delinquent payments. Late is fixable, but some people will not pay any further and not respond to us. Yes, we have a foreclosure process, but it's timely and costs us, plus our land is unsellable during this process. The point is, any lack of payment or completely dropping payments on the land will not affect a single thing with your credit. If you don't pay your credit card, though, you'll end up with major issues. With us, you'll just be out of the contract and have lost your shot at owning the land. But it's better than hurting your future; things like home purchases and car purchases can basically end your credit score life. At least with land like we sell, no long-term harm is done.
Cash Advances on Credit Cards
Another option is doing a cash advance on your credit card. Suppose the person or company is not accepting credit or financing, but you don't have the cash in the bank. You can often do a cash advance on your credit card. While limits are different with each card, you can deposit cash into your bank and pay back on the credit card over time. Thus, allowing you to buy the land in full because there was no other way to do it. But your interest rates might not make sense doing this.
Overall, it's pretty cool you can buy land on credit or even use financing. Land ownership is great; it can increase in value, you can flip land, and even make enough to build homes one day. Starting with some low-cost land is not a bad option; in just a few years' time, we have seen land we sold for $2k-$3k go up into the $30,000 range. Even some in Hawaii that we sold seemed to change value in just two months. So investing in real estate isn't just for the wealthy; many start small and even do so on credit or other people's money.
