Real estate loans have recently become quite popular – testifying to these is the large number of companies offering such services. However, many people doubt whether such a solution is safe at all. As it turns out, the fears are quite justified. Below are the most important information about real estate loans – how they work and what to look out for.
Real estate loan – the most important features of the offer
Real estate loans are offered by both banks and non-bank institutions. At the bank, they are simply called mortgage loans – they can be taken for both real estate and other purposes. In this text, however, we will deal with non-bank loans, which raise the most doubts.
Non-bank loans against real estate are intended for any purpose, including investment ones, because many institutions offer such a solution not only to individuals, but also to companies. The characteristic features of such a non-bank loan include:
- high loan amount – usually it ranges from 50 to 80% of the property value, i.e. up to several million zlotys,
- any property can be a collateral for the loan,
- short repayment period – usually it is from 6 to 36 months (mortgage loans in the bank are repaid for years),
- simplified credit procedure – in many cases the application can be submitted online and you can receive a preliminary credit decision in 15 minutes; the procedure for estimating the value of real estate is also simpler than in the bank,
- lower requirements for creditworthiness – many non-bank loans are offered to indebted persons, without checking BIK and BIG, without the need to provide earnings certificates, and even for people with debt collection proceedings.
Who most often uses a real estate loan?
It is generally believed that non-bank real estate loans are for people who cannot take advantage of the banks’ offer due to lack of creditworthiness or a negative credit history. Indeed, some offers are even directed at people in a very difficult financial situation – thanks to a loan against real estate they can, for example, pay off the bailiff and avoid auctioning the property. This type of loan is also often used by people who need large amounts of cash very quickly for extremely important purposes, e.g. investment purpose or expensive treatment abroad of a family member.
What should you look for when using a real estate loan?
Non-bank loans against real estate seemingly seem very beneficial – thanks to the simplified procedure of granting them and smaller requirements, they can be used quickly and even when the bank refused to grant us credit.
However, such facilities have a price. Therefore, when using such solutions, you should be aware of several pitfalls:
- method of collateral – many companies use the so-called the transfer of ownership as security, which is essentially the transfer of ownership of the property to the lender at the time of the conclusion of the loan agreement – if we are late with repayment, it may turn out that we will also be quite sheltered quite quickly; let’s choose loans secured by a mortgage – this solution is also used by banks and is safer,
- high interest and short repayment terms – bank mortgages are usually low-interest and can be repaid for up to 10-20 years, while non-bank loans secured by real estate have a short repayment period – it happens that it is only 6 months; by borrowing a large sum of money secured by your own home, you risk a lot – before you take out a loan, so let’s estimate your financial capabilities so as not to get into serious trouble.
Real estate loans are basically the simplest solution for borrowing a very large amount of money. Although the offer of non-bank companies with a simplified procedure of granting a loan seems to be much more customer-friendly, bank loans prove to be safer. In any case, however, whether using the bank’s or non-bank company’s offer, it is worth considering the decision to take out a loan against real estate – above all, assess your financial capabilities.