There will come a time in most people’s lives where they consider taking out loans from banks to cover the costs of their home. Unlike regular mortgages that feature interest rates and other unique factors, loans relating to homes differ in the way in which they can be repaid, as well as other individual elements.
About Home Loans
The first thing to point out about seeking a loan is that different lenders will often propose varying rates and terms of repayment. Some loans can be sought if a mortgage isn’t an option (due to a poor credit score for example), whilst others can be secured against specific assets so as to ensure that the lending agency will be able to claim back their investment should the deal go a little awry.
Where mortgages feature rates that can be prone to fluctuating as the years go by, or when particular economic crisis occurs – loans feature APR, or annual percentage rates, instead.
This rate will be calculated on a yearly basis and is often applied to monthly repayments over the course of twelve months. For example, if a borrower was provided with $200,000 toward the cost of their home, of which they intended to repay the full amount after 15 years, the APR would be applied to every twelve months of the repayment schedule. After this period the percentage may be changed by the lender.
Why would you choose a loan instead of a mortgage?
As briefly mentioned above, APR will be split into twelve equal payments over the course of a full year. Any financial expert will tell you that this makes it much easier for a borrower to schedule their repayments, or to keep on top of what they owe in general. As regular interest rates can fluctuate (unless a fixed rate is agreed upon for a specific amount of time), then there’s no sure-fire way to guarantee that what you pay this month will be the same as the next.