What would you say if I ask you to describe a loan? Simple,
you’ll say, it’s the act of borrowing something with the promise of giving it
back. And you’d be right because every loan, no matter how bizarre or
complicated, is essentially an act of borrowing. So, it stands to reason that
if all loans are essentially the same, then how does one categorize them? It’s
quite simple, actually; all loans may be the same, but their terms and
conditions are not. And it is through these differences that loans can be
categorized into any number of types.
In this article, we’ll be discussing two types of loans that
have been mainly separated by their ease of accessibility. Also, for the sake
of simplicity, we’ll be centering the discussion around the mortgage and Real
estate investor loans in San Antonio.
Conventional Banking Loans
- Due to the enormity of their holdings and finances, banks often charge the lowest interest.
- It’s no secret that banks are closely tied to the economy, and that’s why all banking activities, including loans, are heavily regulated by the government.
- Bank loans are heavily dependent upon the borrower’s credit score and debit history.
Loans by Private Institutions
- They offer both government-sanctioned and non-sanctioned loans like mortgage and Real estate investor loans in San Antonio, respectively.
- Due to minimal governmental oversight, private money lenders have more loaning liberty than banks.
- As non-corporate entities, the loaning terms of private money lenders are both negotiable and less reliant on credit scores.
Accessibility of Real Estate Loans
Be it from a bank or a private institution – a loan is
pretty much useless until it falls within your parameters of acceptability.
Conversely, the statement can be presented as the accessibility of a loan.
There are three criteria for judging the accessibility of a real estate loan:
- How likely is the loan to be approved?
- How fast is the loan to be paid out?
- The down payment and interest rate.
Bank Loans
- Due to governmental regulations, there’s a lot of bureaucratic red tape involved with bank loan applications. Moreover, the government also prevents banks from loaning to bad creditors.
- Because of the high number of applicants and the long approval process, bank loans can take quite a bit of time to get approved.
- If you have an excellent credit score and aren’t in a rush, then bank loans are the way to go.
Loans by Private Lenders
- Private money lenders aren’t bureaucratically bound as the banks and are therefore free to loan to people with less than excellent credit scores.
- Applications for private loans, like the Real estate investor loans of San Antonio, require minimal time and are usually approved within a week.
- Private money lenders are well suited for those looking for quick, hassle-free approvals as well as those who can’t get favorable terms from a bank.
Should You Take a Loan
Lastly, let’s talk a little about whether or not you should
take a loan for your next real estate investment. The simple answer is that it
depends, and the complicated answer is that it depends on a lot of things. But
a simple rule of thumb is that if you have some experience with real estate
investment and are looking to substantially increase your portfolio, a loan
might be a sensible choice. However, be sure not to do anything like that
without consulting a professional financial analyst.
