If you have doubts about whether it is better to go to the bank or a private investor to apply for a home equity loan, this article can clarify your outlook.
Mortgage loan guarantee
First of all, you should know what are the main differences between a loan with a mortgage guarantee granted by the bank and that given by the private investor.
- Interest rate : the bank offers a much lower interest rate than that of a private investor, and therefore, the loan is cheaper for you when you go to the banks.
- Capital on loan : In both options, the amount of money that you can obtain in a loan condition depends on the commercial value of the real estate placed as collateral. Generally, the bank offers around 80% of said value, while the investor less than 50%.
- Payment term : The investor usually provides short terms, since his business depends on the rapid return of capital. In counterpart, the bank offers long terms, which in some cases are five times that of the investor.
- Term of delivery of the money: The bank usually takes several fortnights to process the request, and to this you must add the time it takes to obtain some documents that are required. Instead, the investor usually grants the credit in a few days.
- Income support : Banking requires you to support monthly income, the investor does not.
- Credit history: While it is essential for banks to present an adequate credit history, the investor does not evaluate this history.
Which is better, go with the bank or with a private investor?
The answer depends on the scenario you are in when you apply for the home equity loan. That is, there is no definitive answer, but it depends on the particularities that your case presents. However, you should consider that:
- If you have a good credit history, and can sustain income, your best option is to request the loan from the bank. With this you will obtain better credit conditions.
- If you are reported negatively in a credit bureau and / or cannot support your income, your only option is to go to the investor.
- If you are in a pressing situation, and you need the loan immediately, your best option is to negotiate with the private investor.