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Advantages of a Home Equity Loan Over a Personal Loan

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Advantages of a Home Equity Loan Over a Personal Loan

(Photo : Pexels)

If you have a project in mind that requires a high budget, you will be happy to know that requesting a personal loan with a high interest amount is not the only solution. If you own a home in your name, it can serve as a real estate guarantee to get financing and help you achieve your goals.

If you require a large sum of money, a home equity loan has multiple advantages compared to a personal loan. Next, we invite you to know its benefits so that you can decide what type of loan is best for you.

What is the difference between a personal loan and a home loan?

The main difference is that the personal loan does not require collateral, but, for that very reason, the bank will not risk lending large amounts. On the other hand, through a mortgage guarantee loan, your property will help you obtain better credit conditions, such as lower monthly payments, longer payment terms and much lower interest rates.

While in a personal loan, only your financial situation is evaluated, that is, if your monthly income is enough to pay the amount you are requesting and if your credit history is clean. On the other hand, to apply for a mortgage guarantee loan you must have a home registered in your name, since this will be pledged as payment insurance.

This type of financing is also known as liquidity credit and can serve multiple purposes.

Advantages of home equity credit

- Offers competitive interest rates

- You can access high financing amounts

- You get longer terms and more comfortable payments

- Low requirements

- It is a credit granted by reliable institutions

- Offers competitive interest rates

A determining factor in choosing which type of loan is best is the interest rate. The higher the interest, the higher the final cost of your credit. Compared to personal loans, a home equity loan offers much lower interest rates by representing a low risk of loss for the bank thanks to the guarantee of your property.

You can access high financing amounts

The mortgage guarantee credit is calculated based on the value of your home, which means that you can obtain between 50 and 90% of the value of it, depending on the financial institution in which you apply for the loan.

If you have in mind to carry out a project that requires a high budget, this type of loan is better for you, since personal loans offer significantly lower amounts. In addition, the money obtained can be used for any purpose. Regardless of whether you want to go on a trip, buy a car, pay off other debts or start a business, you will not have to justify the purpose of your loan.

You get longer terms and more comfortable payments

Regarding what type of loan is better comparing the facilities they grant to pay, the mortgage guarantee credit has an advantage, since it offers payment terms ranging from 5 years to 20 years, according to the amount obtained and your financial capacity. You will be able to choose monthly payments tailored to your needs, so that payment does not become a problem and, on some occasions, you will even have the possibility to finish paying earlier if your income has increased.

Low requirements

The essential requirement to apply for a mortgage loan will be to have a property that is legally registered in your name and has all the documents and payments up to date. This represents a great advantage compared to personal loans because you will not have to look for collateral. In addition, you could get a home equity loan even when your credit history is not in perfect condition.

It is a credit granted by reliable institutions

The mortgage guarantee credit is granted through financial institutions with years of experience and good reputation, so you will leave your information in the hands of reliable companies, carrying out established processes in a transparent way. Not to mention that, thanks to current tools, it is possible to request a liquidity credit online easily and safely.

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