Loans vs mortgage: How to choose the best option?



Faced with any considerable disbursement, just before contacting the corresponding banking entity, one always ends up asking the same question: what is the best way to finance it? And, with such a doubt, the following dilemma usually appears: loans vs. mortgages.

First of all, it should be noted that two financial products are being discussed whose functions and uses vary significantly. For this reason, anyone interested in online loans should consider the following.

What is a loan?

What is a loan?

It is an operation through which the financial institution makes available to a third party, through a contract, a certain amount of money. This must be returned within a set period, and has a series of interests and commissions agreed in advance. Loans are common for the acquisition of services and goods whose amount, despite not being prohibitive; You are not able to face cash: vehicles, trips or appliances are usually the most typical examples.

What are mortgages?

What are mortgages?

These are loans for whose payment the value of a property is used as collateral. This implies that, if the agreed conditions (non-payment, deadlines, etc.) are not met, the financial entity can execute the mortgage and gain ownership. Mortgage loans are mainly used for home purchases. But also to ask for loans on the value of one that is already owned.

Loans vs mortgages, what is more convenient?

Loans vs mortgages, what is more convenient?

To assess the best option, the following factors should be taken into account:

Amount and terms

– Mortgages: granted for amounts greater than 50,000 dollars. The repayment term can exceed 10 years and reaches 30. Sometimes, it can reach 40 years.

– Loans: for amounts less than 80,000 dollars. The repayment term does not usually exceed eight years; Therefore, a much higher monthly amount should be assumed, comparatively speaking.

Costs

– Mortgages: the interest can be fixed or variable, being in the latter case normally associated with Euribor. (To cite an approximation, the nominal interest rate will be around 2% for fixed mortgages). On the other hand, there are other associated expenses that can easily reach 5,000 dollars: loan opening costs, agency, appraisal, notary, registration and taxes.

– Loans: the interest rate is usually around 7-8%. However, its associated expenses are significantly lower: around 300 dollars (opening and study fees, brokerage fees). Not applicable for all loans.

Formalities

– Mortgages: appraisal and registration of the property in the Property Registry; negotiation of interest rates; Notary and Tax of AJD.

– Loans: signature before a notary (only in case of large amounts). Therefore, much more agile.

Depending on each case and considering the above, the client can now easily choose between loans vs mortgages. If your option is loans, don’t wait any longer and compare the best online loans in the market in Ideal Loans.