Perhaps everyone in a lifetime finds themselves in a situation where they need to borrow funds and turn to the bank for a loan. When choosing a specific product, you will be guided by how much you need and what you would like to use it for. If you want to prove to the bank the purpose for which you borrow money, you can apply for a consumer loan, but also for an American mortgage. What is the difference between these non-purpose loans? When to choose consumer and when rather mortgage loan?

 

Mortgage for anything

Mortgage for anything

A mortgage does not necessarily mean a home loan. The main feature and at the same time the biggest advantage of American mortgages is that you can use the borrowed money for anything. It does not have to be strictly for the purchase of land or real estate. It can also include home furnishings, a new car, study abroad and travel.

 

Consolidation with American Mortgage?

Consolidation loan

An American mortgage can also serve well those who want to consolidate their loans and can guarantee real estate. This may be the case, for example, where the credit burden of households ceases to be viable and it is necessary to merge more mainly consumer loans into one. By extending the repayment period, the monthly repayment will be reduced. In any case, the lender should carefully consider this step. While real estate consolidation is not pledged for normal consumer credit consolidation, the opposite is true for US mortgage consolidation.

 

Parameters as with normal mortgage

mortgage loan

Usually you can borrow from 1 50 000 – 300 000 USD, depending on the specific bank. The maximum amount of a non-purpose mortgage is usually limited by 70% of the estimated price of the property and the maximum amount, which varies from bank to bank. The amount of repayments will depend on how long the repayment period you choose. Even with an American mortgage, you choose to fix the interest rate, which is usually from 1 to 5 years, but again depends on the conditions of the bank. On the mortgage calculator you can simply calculate the parameters of the required loan.

 

Liability of real estate

Liability of real estate

The basic feature of not only classic mortgages is the guarantee of real estate. It is also possible to guarantee the land to be built. If you do not repay properly, the bank will receive real estate instead of your money. Exceptions are situations where you are insured in case of inability to repay.

Benefits

  • The US mortgage has lower interest rates than unsecured consumer loans, thanks to real estate collateral.

  • The maturity of a non-purpose mortgage is the same as in the case of a special-purpose mortgage loan in the range of decades. Therefore, it may be more advantageous for many than a regular loan in terms of repayment burden.

  • You can use mortgage finance for anything, including consolidating your loans.

Disadvantages

  • You cannot deduct interest from taxes, even if you decide to use the money drawn from an American home mortgage.
  • You guarantee your property, so there is a risk that you will lose it in the event of insolvency.
  • More complicated agenda for credit processing. The approval process is longer than for a consumer loan because the bank needs to provide all necessary documents related to the mortgaged property.
  • The above argument is also related to another disadvantage, which is the fees for obtaining documents relating to mortgaging property – an estimate of the price of the property, extract from the land register.

 

Consumer loan

Another way to raise funds for anything is consumer credit. Unlike a US mortgage, the bank will not require real estate collateral for ordinary non-purpose consumer credit. The price for not having to stop your property is usually a slightly higher interest rate than in the case of an American mortgage. The borrower can collect a large amount of the loan amount and maturity.

Benefits

  • Relatively easy and quick loan processing.
  • Money can be used for anything.
  • You can set a shorter maturity and pay off the loan faster than a mortgage.
  • Consumer credit can be obtained from lower amounts and you do not have to over-indebt.
  • You do not guarantee the bank your property.

Disadvantages

  • Compared to an American mortgage, consumer credit has a higher interest rate.
  • You cannot set a maturity as long as a mortgage.
  • The maximum amount of consumer credit provided without collateral is lower than in the case of an American mortgage.

 

Contact experts

Contact experts

Before deciding on a particular product, consider carefully whether it is necessary for you to be in debt and whether you really need it. Calculate how much the loan will burden your family budget and whether you are able to repay the entire loan. Contact experts to assist you with your credit. A mortgage specialist will offer you offers from multiple banks and help you choose the right financing. Arrange a meeting with our mortgage broker and you will learn everything you need.