If we want to take a loan to renovate our apartment, we basically have two options. We can choose a cash loan and a mortgage. Which one to choose depends on the amount you want to borrow and the loan period.
We can take one of three types of bank loans for the renovation of an apartment or house. They differ mainly in the amount of interest, repayment length and security. In this case, the highest interest-bearing loan will be a cash loan, which can be used for any purpose, so also for renovation.
The actual interest rate ranges from 9% to even 35%, depending on the bank’s offer. Taking out a cash loan in the event of a house or apartment renovation will come out the most expensive for us, but the easiest way to obtain the necessary funds is to get it.
Let’s say we are interested in the amount of USD 8,000
The time in which we want to repay the loan is 12 months. The monthly installment should be from 700 USD to 800 USD, depending on the bank and its offer. Considering the mortgage, it may turn out cheaper, but we will face additional security charges – the costs will increase significantly.
The situation is different when we want to borrow a much higher amount, e.g. USD 40,000. Then we pay the bank a lot more than when paying the same amount of mortgage.
Additional costs associated with, for example, collateral and property valuation are nothing compared to the high real interest rate of the cash loan.
Another good way to get money to refurbish an apartment or house is a mortgage. This is definitely the cheapest solution for this type of expense.
The mortgage loan is secured by the borrower’s real estate
So if we are the owners of real estate, in the form of a construction plot, a house or even a renovated apartment, we can take out a loan against her. The repayment of such liability may be spread over even 30 years. Unfortunately, it is a loan for higher amounts, which starts from USD 20,000.
There is one more solution for people with a bad credit history. These are non-bank loans, among others, at companies such as Good Finance or Good Credit.
Although this type of loan turns out to be relatively expensive, for some people it is the only way to finance an inexpensive renovation. The amount we can borrow is much lower compared to the previously described types of loans, but it is much easier to access and requires no collateral.