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Unsecured Mortgage: What it is and how to get it?



We will talk about the unsecured loan what it is and how to get it but above all in what circumstances it is worth asking for it and when instead it is appropriate to resort to other forms of financing. If you’ve never heard of it, the time has come to let you know why it might come in handy.

Unsecured Mortgage: What it is and definition

Unsecured Mortgage: What it is and definition

Few people know exactly what an unsecured mortgage is. It must be said immediately that it is a loan even if it is managed differently than a common loan. What do you mean?

First of all, it is a type of loan that does not require any form of guarantee, therefore a guarantee is not necessary, much less a mortgage .

To make the contract valid, you only need to sign the document, called the chirograph, with which you undertake to repay the loan that has been granted to you at the agreed deadlines.

You can use this form of loan only if the request for the amount is small, that is to say it must be less than or equal to 30 thousand USD.

In a nutshell, they are loans that are approved by financial institutions without the need to present visible guarantees, but everything remains focused on self-certification of income. Instead of committing assets and assets, the borrowers show their credit history on a document which they then sign at the bottom.

When to apply for an unsecured loan

When to apply for an unsecured loan

When you ask for a loan to buy a new car, financing is usually guaranteed, in the event of non-payment of the installments, the lender has all the rights to take the car away.

The same goes for home loans. If you are unable to repay the installment, you risk being forced out of the house. Business loans can be secured or unsecured, but in this case you will be asked for personal guarantees, so in order to finance your business you will be forced to pledge your home or other assets.

With the unsecured loan the problem does not exist because it does not provide guarantees, but in some particular cases the bank may request them.

When you do not have the necessary requisites to obtain the desired money, you can guarantee the mortgage through promissory notes or by pledging securities or endorsements.

The unsecured loan is often granted to companies and businesses, private individuals can access it if financing is requested to deal with condominium works, such as the purchase of an asset, the installation of photovoltaic systems or to make an energy improvement to the building or to perform renovations or creating common spaces for condominiums, in these cases it is difficult for the bank to proceed with the mortgage as the property belongs to several people, therefore resorting to the unsecured loan is a valid alternative.

It should also be considered that the unsecured loan lasts from 18 months to 10 years. As with any mortgage, the underwriting of the loan requires that it be compensated in monthly or quarterly installments and that they are calculated by dividing the amount disbursed by the number of installments chosen, then adding to them the interest portion which will be calculated based on a rate , which depending on the choice, can be fixed or variable.

Unsecured mortgage: which rate to choose

One of the substantial differences that passes between an unsecured loan and a mortgage loan is the interest rate which in the first case, precisely because no guarantee is required, is higher.

The variable rate has its pros and cons, since it is calculated by referring to one or more indexing parameters, it can happen that the amount of the installment to be paid is never the same, not only sometimes it could also increase.

With the fixed rate, the installments remain the same amount until the debt is extinguished, however if there was a reduction in market rates, you cannot take advantage of it.

Particular forms of unsecured mortgage

There are different forms of unsecured mortgage, in addition to the common loan that we have seen so far, where the applicant’s signature is sufficient to obtain the loan, without presenting further guarantees, there are two other forms: the unsecured loan which provides for the payment of a one installment and the one with deferred amortization .

The first allows you to repay the loan by paying normal installments and eventually pay off the debt with a single installment of a higher amount. The second is simpler and more convenient for those who obtain funding because the payment of the first installment takes place six months after the disbursement of the sum.

To obtain the unsecured loan, simply present the paycheck or the pension slip . In fact, to pay off the debt it is possible to sell the fifth of both. For the credit institution, this form of reimbursement is the safest solution and represents a guarantee in all respects.

Is the finalized loan also unsecured?

The answer to this question is affirmative, because the targeted loans concern small sums that are required to purchase mainly an appliance.

The bank would never mortgage a washing machine or a refrigerator, however this does not mean that the credit institution does not carry out all the necessary checks before disbursing the sum, also because in case of non-payment of the installments, penalties will be applied in any case .

For an unsecured loan when the signature alone is not enough, even if it remains the main guarantee instrument, the signature of a guarantor is required.

Disadvantages and advantages of an unsecured mortgage

Disadvantages and advantages of an unsecured mortgage

The unsecured loan is not always granted, if on the one hand it is advantageous for those who request it, it is not the same for the creditor.

Banks usually are not inclined to grant it since the sums paid do not exceed 75 thousand USD for natural persons and 120 thousand USD for legal entities and then it must be considered that the weaker the guarantee, the more the loan is lowered in amount.

An unsecured loan is hardly taken out if the duration of the contract exceeds 10 years, then where there is a property on which to add a mortgage, the banks prefer, only for convenience, to grant a different mortgage.

At this point it is legitimate to ask ourselves when it is useful to take out an unsecured loan. This particular loan is used when the sums commissioned are small, when the loan is used to restore or restore the functionality of a common good, for example a condominium, when the repayment term is short.

Unsecured mortgage: advances 2019

According to the data in our possession, 2019 could be an advantageous year for unsecured mortgages. For many years this type of financing has been closed in a drawer, today it is making a comeback.

Debt lending is changing and lenders are lining up with competitors. This type of mortgage could be the right tool to allow especially young people to access small amounts of credit even for the purchase of a property, the important thing that the amount is not excessively high.

In an era where young people leave their paternal home early, it could be the right choice to have a sum of money for the purchase of a studio apartment. If the guarantees presented by the customer are not satisfactory, a parent can always intervene by signing as guarantor.

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