You may be faced with the choice: are you going to borrow money with a mortgage or personal payday loan? This can be discussed, for example, when borrowing money for the renovation of your house or when borrowing money for your residual debt. What are the differences between these loan products and when is one more interesting than the other?
Mortgage or personal payday loan: the differences
Since the adjustment of the mortgage requirements in 2013 and 2014, there is actually little difference between a mortgage and a personal payday loan. Both loans must be repaid and both loans are tax deductible in some cases. The most important difference between a mortgage and a personal payday loan is that a mortgage is a loan for which a purchase house serves as collateral.
Borrow money renovation
As mentioned, the choice for a mortgage or personal payday loan can be discussed when you want to borrow to renovate your house. A mortgage is really only interesting if you want to borrow more than € 50,000 for your renovation or want a loan term of more than ten years. In all other cases, a personal payday loan is probably the best option.
Benefits personal payday loan
The advantage of a personal payday loan over a mortgage is that you can opt for a shorter term. This allows you to adjust the duration of your loan to the duration of your loan objective and you are debt-free rather than a long-term loan. In addition, it is a lot easier to take out a personal payday loan. This is because no notary or appraisal is involved, unlike when taking out a mortgage. This also saves you costs, which means that a personal payday loan is cheaper as a whole despite the higher interest.
Borrow money residual debt
Another loan objective where you may be faced with the choice between a personal payday loan or a mortgage is to borrow money for residual debt. Sometimes your residual debt can be co-financed with your new mortgage. However, this is not always possible, either because of your income or because of the value of your new home. A personal payday loan is then a good alternative. You then benefit from the benefits of the personal payday loan and from the tax deductibility of the interest on your loan for your residual debt.