Personal loan vs home equity loan
The main difference between these loans lies on the surface. To take out a secured loan, you must provide collateral, which you can lose in case of non-payment. A consumer loan does not force you to do this (to decide what you will give instead of money in case of an emergency): you borrow the right amount from the bank. If you do not pay on time, the interest will drip, and the debt will accumulate, but the apartment or car will not be taken away from you without a court order. So, personal loans vs home equity loans are payment differences. Personal protects you from home invasions.
You'll probably wonder: then why take out a secured loan? There is another significant difference that explains it all. A consumer loan can be taken out for a smaller amount than a secured loan. Without collateral, the maximum loan amount varies from one and a half to three million rubles - depending on the bank. In addition, this money must be paid back quickly: you are given up to five years to do so. Not everyone can pay back the money that quickly.
What you can pledge as collateral
On this page, we try to understand personal loan vs heloc. First of all, let's see what collateral can be. A pledge is something of tangible value that belongs to you. And you are obliged to give it to the creditor if you do not fulfill your obligations, that is if you do not pay.
There are different kinds of collateral. They can be:
Real estate. Residential, non-residential (garage, dacha), and commercial real estate;
Automobile (both individuals and legal entities);
Jewels. These are precious metals and jewelry;
Saleable goods (for businesses).
Be prepared that banks require the appraised value of the pledged property to be at least 70-80% of the amount you request. It is a standard requirement that allows financial institutions to protect themselves.
Personal loans vs mortgages
A mortgage is a loan. Its difference is that a mortgage is strictly a special-purpose loan to purchase housing. In this case, the property acts as collateral under the loan agreement. And is encumbered by the bank until the end of the payments. There are no restrictions on the type of residential property. Mortgage can be taken on primary or secondary housing in the city or countryside. Moreover, it can be applied to houses under construction, including apartment buildings or real estate under construction in the private sector.
It turns out that a consumer loan is easier because it allows you to freely dispose of both the money you receive and the apartment you buy. On the one hand, this is true. But there are other nuances.
Mortgages are available for up to 30 years. The maximum possible loan period depends on the borrower's age and can be adjusted. When applying for a mortgage, the borrower can choose the required loan period himself. Early repayment allows you to reduce the mortgage term when applying for a mortgage with a potential borrower works manager, who explains the nuances of paperwork and provides information about the bank's services.
A consumer loan can also be repaid early and taken for the required years, but the possible credit term for such banking products is less. As a rule, the standard consumer loan can be taken out for up to 5 years, and the non-targeted loan is secured by real estate - up to 15 years maximum.
So, now we can answer the question: home equity loan or personal loan? If the goal is to buy a home, it is advantageous to take out a mortgage. In other cases, a consumer loan will do. It can be repaid faster than a mortgage since the loan amount is smaller.