Personal Payday Loan or Loan For Real Estate Covered?

There may be situations where you need a larger loan to start someone, such as a business, or to cover an inevitable larger expense. In such cases, the personal payday loan can be the first thing one can think of, as it is the most common type of loan available for any purpose. At the same time, it is not the only thing: a free-to-use mortgage can be a good alternative for those who want to apply for a larger amount of credit or are willing to include real estate collateral.

 

Whatever the purpose, the loan is free to use

Whatever the purpose, the loan is free to use

Free-use mortgage is a type of loan for which the amount received as a loan can be used for any purpose, but a property serves as a cover for the loan. In other words, the borrowing bank does not look at what the borrower is paying for the loan received: it may be related to the underlying property (renovation, expansion, etc.), but it may be a completely different goal (start-up capital, replacement of existing loans, other property expenditure) etc.), completely free.

A mortgage loan repayment guarantee, ie a guarantee for a real estate pledge on the name of the bank. In the case of normal personal payday loans, only the debtor’s income can be such a security, so the bank has a much higher risk of the loan than when the pledge property provides cover. This has a big advantage for the debtor as the credit is better due to the collateral, ie you can get a loan on more favorable terms.

 

Real estate coverage provides better conditions

Real estate coverage provides better conditions

You can apply for up to 80% of the value of the real estate collateral (in practice, to a lesser extent), ie you can get a much larger loan than personal payday loans. The higher the reliability of the loan, the lower the interest rate. Mortgage loans can be calculated at a much lower interest rate than for personal payday loans – but interest on free loans will still be higher than interest on mortgages. In today’s market environment, interest rates typically range from 5 to 10%, depending on the amount of the loan, the maturity, the interest period, the value of the property and the debtor’s income.

Applying for free mortgage is done in the same procedure as for other loans, the bank examines the creditworthiness of the borrower. The existence of real estate collateral alone is not enough for credit assessment, the debtor must have at least 3 months of employment, must present an employer certificate of income, and a reason for the exclusion of previous loans (BAR list). In the case of mortgages, valuation is required and the loan can be disbursed after the land administration.

 

Benefits of Free Mortgage Loans:

  1. a higher credit amount thanks to better credit
  2. the loan is available at a lower interest rate,
  3. the maturity may be longer so the monthly installment is lower.

 

Disadvantages of Free Mortgage Loans:

  1. own property that you own
  2. it is necessary to involve as collateral, ie pledge and
  3. administration may take longer than a personal payday loan.

 

Which one is better then?

Which one is better then?

Mortgages can only be raised by those who have real estate that can be covered as collateral, for which the bank can subscribe for a lien. This is a risk for the debtor only if he does not judge his options realistically – if someone takes out a loan responsibly, he is aware of the amount of debt he can make and what amount of repayment he can assume, he cannot have a problem with repayment. In practice, it may be more difficult for someone to sell the collateral property during the repayment, so if someone has such a predictable plan, buy a new property before applying for a loan.

All in all, due to the more favorable credit conditions, the borrower has more advantages over the free mortgage loan for a personal payday loan, so if you need a loan, you should definitely find out about these types of loans at banks.