Many of us wonder what is the best form of credit.
Is it worth taking loans with own contribution or will those that do not require any contribution from us be better?
In many banks you can find a loan offer that does not require a down payment, but are such loans profitable for a potential customer? It depends on what we take this loan for. Most often it is buying a house or apartment. For many of us, financing such a purchase with our own funds is impossible and we only have a bank loan. Putting money away to make a down payment is not easy, which is why more people are choosing a loan without a down payment. Business owners who need money to expand or buy a new property usually have a down payment.
If we have a portion of our own contribution, we should not allocate it all to credit. It’s a good idea to leave some money just in case. The funds we postpone will be a kind of security for repayment if there is a situation where we cannot pay the next installment of the loan. Banks are now much more cautious when they grant credit to their clients if they have not made any own contribution. They believe that if they do not have a down payment they may not have enough money to repay their loan installments later. The biggest disadvantage of loans without own contribution is that they are usually more expensive than those where the borrower finances the investment in part. Such loans usually have a higher margin and, at the same time, the total interest rate on such loans is slightly higher.
If we do not have own contribution we must take out a low contribution insurance.
It is a premium paid for three to even five years. Instead of a premium, the bank may increase the margin until it receives own contribution from the client. Given all these circumstances, one conclusion can be made. In the case of a mortgage, its form is more profitable when we have our own contribution. Without it we will have to pay off much more interest and the bank will charge us a much higher margin. Before taking this type of loan, you should raise some of your own capital to finance the investment.