Should I Get a 12 Month Loan to Buy a House?

by Emma A. Financial Writer

A 12 month loan has different uses depending upon the borrower and the amount received by the lender. But the question is – should you really use this loan to purchase a house or a property? Continue reading to find out.

Owning a house is a dream that we all have. We constantly strive to reach our financial goals to make turn this dream into reality. Being a proud homeowner requires a heavy sum of money. If you are considering to take out a 12 month loan to pay for your dream house, then you must know the ins and outs of this credit product. Undoubtedly, these loans work in favour of individuals who borrow smaller amounts of money for a brief period – but what if you need more time than allowed by the lender to repay the loan?

How does a 12 month loan work?

A borrower can apply for a 12 Month Loan on any lender’s or credit broker’s online website by filling up their application form. Once the lender approves the loan application, the amount will be disbursed by the lender. Generally, most of the lenders disburse the loan within minutes of approval. However, it also depends on the lender and your bank. Therefore, you must carefully go through the Terms & Conditions of the lender for your best interest.

The loan has to be repaid in monthly instalments that are spread over 12 months – including the interest charge. If a borrower fails to make the repayments on time, the credit score will be damaged.

Why it is not a good option for buying a house?

Purchasing a house or a property helps you get on the property ladder. However, this loan may not serve your purpose. First, you may not get the desired amount of funds that you need to invest in the house. Second, the repayment period is only up to 12 months. That means you have to pay a heavy rate of interest along within the agreed date.

When it comes to purchasing big-ticket items, you must always consider some other source of borrowing money. Though these loans are often termed as Long Term Loans, they do not actually fall into the category of long term loans – such as home loans or auto loans.

Alternatives to 12 Month Loans

Buying a home is moth likely to be one of the biggest investments of your life, where small mistakes may cost you a fortune. Therefore, you must always take help and advice of experts who know the right way and can suggest you how to make a plan for the investment.

Some of the best ways to borrow money for a home are listed below:

• Mortgage Loan
You may always visit your bank to finance your home. Financial institutions will calculate the whole cost and present you with an estimate of your total borrowing along with the repayment plan. If you have a good credit score, the rate of interest charged on the loan may be a lower and the process will be easier, without any hassles.

• Programs and Grants
The government introduces affordable home ownership schemes from time to time to help first-time buyers and existing homeowners to buy a home of their dreams. You may check these schemes and get in touch with their support team to know the details of the application.

Conclusion
When the lender performs a hard credit check on your credit report, a few points are knocked off from your report. How you manage your monthly repayments will have a major impact on your score. Therefore, before you start hunting for a house, consider the overall cost of borrowing that includes stamp duty, mortgage fees, and tax. You must have a strong financial backbone before you make a major decision.