It is good to be able to achieve the goal of building a house or buying a new car, having at your fingertips various solutions in the form of financial products. But how do they differ from each other, on the example of a mortgage and cash? You can read about it in the article below.
What does the mortgage look like?
A mortgage is a financial product that is granted for a specific purpose. His security is a mortgage, which is established for the benefit of the bank, on the right of perpetual usufruct or ownership of real estate. We usually apply for this type of loan to finance the purchase of real estate. Mortgage costs depend on many factors. These include interest on outstanding capital and a bank commission, notary costs, or an entry in the Land and Mortgage Register, or credit insurance. And this is only part of the costs that make up the entire liability. In addition, we must be prepared for control from the bank regarding the spending of funds at individual stages of work related to the purchase of real estate.
What is a cash loan?
A cash loan is a financial product that is dedicated to any purpose and which we do not associate with running a business, e.g. shopping, flight ticket, spa treatment, new bicycle, vacation with friends, etc. Such credit also generates costs. These are mainly interest. Banks provide annual interest rates for easier calculations. Whereas other costs, such as commission, incl. for granting a loan, it can be set differently depending on the bank’s policy. An interesting starting point for assessing a given bank’s cash loan offer is APRC, i.e. the Actual Annual Interest Rate. Thanks to the identical method of calculating this ratio, you can objectively compare the offers of many financial products for each bank and loan. It is also worth paying attention to what the fixed interest rate of our loan looks like, because as its name indicates, it remains unchanged throughout the repayment period.
What are the differences between a mortgage and a cash loan?
There are a few things to consider about your mortgage:
- It is granted to finance the purchase of an apartment, house construction, building plot, house extension or renovation.
- This is a big obligation, therefore the bank will examine our creditworthiness and will expect collateral.
- Time: 25-35 years (depending on the bank offer)
- The maximum age of the borrower is 70-75 years (depending on the bank offer)
- Credit limit: from 20,000 up (some banks do not have an upper limit)
- Own contribution: there is usually a 20% obligation of own contribution to receive a loan
- Complicated procedures and a long deadline for processing a loan application
These are not all the features that characterize a mortgage. So, as you can see, this is quite a challenge.
The cash loan has other characteristics:
- It is granted faster because application processing takes less time
- Cash loan funds can be used for any purpose (this is an advantage of this loan over a mortgage).
- Loan amount and loan period (depends on the bank offer)
- Credit limit: low, even from as little as USD 500
- Time to pay the liability: from 3-6 months (depending on the bank offer)
- Own contribution: not required.
- The procedures are simple.
- Interest rate: it can reach even 10%, which is to its disadvantage in relation to mortgage loans.
Where to find a loan on good terms?
At the moment we will find a lot of offers on the market regarding both mortgage and cash loans. Both require time to analyze the offers available in banks and non-bank institutions. If we do not have much time or the opportunity to complete documents and wait for the application to be processed in the bank, we can use a convenient tool, which is the service. There we will find offers of various non-bank companies that the service will adapt to our capabilities. Just fill out the simple online form here and then wait a few moments for verification. When there are different, personalized loan offers, all you need to do is sign a contract and without leaving your home, completely online, we will receive funds to our bank account.
What to look for when applying for a loan?
To get a loan, regardless of whether it is a cash or mortgage loan, or maybe another one, let us pay attention to our creditworthiness and credibility. We have already written about it here, it is worth knowing how to ensure that the bank perceives us as an “attractive” customer. If we have not had the habit so far, and we want to apply for a mortgage, for example, we should start postponing, saving funds for the required own contribution, e.g. when financing the purchase of real estate. Let’s also be vigilant with contractual provisions regarding interest and commission for the bank. Because we can be sure that such interest rate on mortgage loans will be relatively low, but with other loans, there is no such certainty.