Better a personal loan or a pre-purchase amortization?

Evaluating personal loans and pre-purchase depreciation is not always easy, given that the convenience of one or the other form will have to be carefully considered on the basis of many specific elements.

Therefore, if you are wondering what is better between one or the other alternative, or maybe you do not understand what pre-purchase depreciation is , you are definitely in the right place.

During the next few lines we will guide you step by step in identifying the best solution for your financial needs, be they small loans or large mortgages, helping you to understand what the above alternatives are. We have briefly introduced you , and what is appropriate for you.

Pre-purchase amortization


In order to better understand which solutions are best suited to you , we can only try to put a small focus on pre-purchase depreciation.

In fact, considering that fast online loans you should have already heard about on several occasions, it is better to focus above all on pre-purchase depreciation , which we will now “reveal” with a small example.

Imagine that your project to be funded is to buy an asset worth 100,000 euros, with a useful life of 3 years.

At the end of these 3 years the market value will presumably grow by 10%, with the result that the value at the end of the period will be 110,000 euros.

If then you suppose to sell the good after 3 years at half price, that is to 50,000 euros, it follows that to be able to buy back the good you will need a fund equal to 110,000 euros less 50,000 euros, or 60,000 euros.

But why did we do these calculations?

Very simply, because 60,000 euros is the amount you should try to share in the 3 years of useful life of the asset, for 20,000 euros per year.

In the case of a lease, the depreciation charge will be given by the leasing fee , increased by an additional amortization if you want to redeem the asset at the end of the contract.

Personal loan

Personal loan

So far, a quick example of pre-purchase depreciation, through which you will probably have understood the main characteristics of this particular form of financing.

The alternative that we want to talk about today is instead the traditional personal loan , which you should already know, given that we have talked about it many times over the past few months in reference to many technical forms such as loans for protested or loan changes .

Going down again in an example context, we assume that you want to buy that specific good that is the object of our example of pre-purchase depreciation, obtaining the entire capital that is necessary to be able to proceed with the purchase transaction, to then estimate how much it would cost you to purchase of a new good of a higher category , and again what would be the time of use of the asset based on the annual use, what would be the value of the asset at the end of its useful life according to average market prices, defining at the end which it would be the depreciation fund and the related quota.

Also in this case, an example will lead to greater clarity that should be placed to avoid confusion and, above all, to allow us to arrive at a situation of confrontation with greater clarity.

We therefore imagine that you want to buy a good for your business worth € 36,000, which you will have to use for 5 years. At the end of this fruition period the asset will have a commercial value of 14,000 euros, and the capital to be reconstituted at the end of the 5 years in order to proceed with a new replacement operation will be equal to the value of a new superior category asset equal to 50,000 euro between 5 years minus € 14,000 of commercial value at the end of the fruition period, for a total of € 36,000, to be divided into 60 monthly installments.

Comparison between pre-purchase depreciation and personal loan


At the end of this brief discussion you will probably be wondering what are the main assessments you should make to understand what is the most tempting and convenient alternative.

In short, is a personal loan better for your situation or is pre-purchase depreciation better ?

The pivot of all the reasoning that should allow you to arrive at the identification of the best option between personal loan or pre-purchase depreciation probably depends on the possibility of obtaining a return on capital, or of being able to invest it by collecting an active interest.

Taking an example, we assume that your credit institution will grant you an interest equal to 1% per annum on the capital that you will deposit in the coffers of the credit institution. If you deposit 10,000 euros, your gross interest will be 100 euros, and for a total of 5 years it will be 500 euros.

Now, if at the same time you are considering to proceed with the purchase through personal loan of the good of your dreams, you will have to try to understand if the interests that you will go to pay for the debt that you will contract with the bank will be greater or smaller in comparison to those active that the bank will give you for the stocks you will invest in it .

In the event that the interest income is greater than the active interest, you will need to borrow with a personal loan and leave your savings in the current account, while in the reverse case where the interest income is less than the passive interest, it would probably be appropriate to opt for a pre-purchase amortization.

But is it really that simple to make these assessments?

Unfortunately for you, it is not so. Apart from the difficulty of being able to identify standard and constant conditions on the part of the bank, as well as being attractive on the front of interest income such as to be able to be compared with the passive ones, it is also true that normally in the repayment of the debt by personal loan it applies a French repayment schedule. But what does it mean?

The French amortization plan envisages that there is a decreasing trend of the interests according to the capital repaid, with the consequence of making the indebtedness more convenient in its last phase, when to be repaid is almost entirely capital.

In light of the foregoing, therefore, in order to establish what is the correct financial element capable of favoring your choice between the personal loan or the pre-purchase depreciation that we have been able to describe in the previous lines, it is probably advisable to make a calculation precise total interest income and expense, and finally estimate how much profit and loss the transaction will amount to.

Personal Loan to Restructure House 2018

Are you looking for a personal loan to renovate your home? 

Of course this type is part of personal financing, choose the most convenient and, above all, advantageous from the fiscal point of view.

I will show you two different forms of financing: the so-called loan restructuring or alternatively access to an ad hoc mortgage.

Why choose a loan instead of a mortgage?

loan mortgage

So is it better to take advantage of the personal loan to renovate your home? Or is it better to use the mortgage formula?

There are basically three reasons that can make the decision to obtain a loan through a personal restructuring loan:

  • a notary is not required , with the consequent notary fees
  • it is not necessary to register the mortgage on the building to be restored
  • it is a lean and fast procedure

If you are thinking that these three reasons are sufficient to think about obtaining a loan through personal loan restructuring, by continuing to read this article you will find all the information to understand which loan to choose.

What the restructuring loan can be used for


Restructuring personal loans can be used to finance different types of interventions on one’s home:

  • ordinary maintenance work , of limited capacity, such as the restoration of plaster or new flooring
  • extraordinary maintenance interventions , which touch on the supporting elements of the house
  • interventions to change the perimeter of the house and its appurtenances , such as the extension of the premises or the construction of a box

Who can request a personal loan restructuring

personal loan

To apply for a restructuring loan it is necessary to have and present

  • aged between 18 and 75 years
  • Italian citizenship
  • a demonstrable income
  • a current account
  • Estimate

Those just specified are in fact requirements that do not differ much from those provided by other types of personal loans and are used by the bank to evaluate creditworthiness on the one hand .

Naturally, make sure that there are no reports. A further check is the level of income, so as to be able to establish a rate suited to one’s income.

Using particular valuation criteria for personal loans is the way in which banks protect themselves against the risk of insolvency.

Which loan for restructuring to choose?

Which loan for restructuring to choose?

In the market, as we have already said, there is a very varied proposal for restructuring loans . Some products are advertised by highlighting the very low spread but leaving aside the indication of the APR, which is the true cost of the loan.

Other offers, on the other hand, are limited in time or are tied to different factors, such as the duration of the loan or the minimum and maximum amount obtainable.

Let’s look at some of the offers of Italian banks for personal loan restructuring.

The amount that can be obtained varies according to the credit relationship: current account holders will be able to request a sum ranging from 10,000 to 60,000 euros, while those who hold a postal booklet may request 15,000 to 50,000 euros.

The reimbursement will have to be made in installments of 36 to 120 months or, in the second case, from a minimum of 30 to a maximum of 84 months.

Restructuring loan

The restructuring loan, with the original name ”  ” allows you to request a sum starting from 3,000 euros with a duration of the loan from a minimum of 19 to a maximum of 120 months.

In addition, if the need arises, you can postpone 1 installment every 24 by adding it to the amortization schedule.

To conclude a restructuring loan in advance

To conclude a restructuring loan in advance

Being a very long loan over time it can be useful to know if you can decide not to use the loan anymore.

The law gives the possibility to effect the early extinction of the personal loan received to carry out restructuring works on one’s own home.

If you decide to choose this option, the contractor will have to repay the remaining capital and could also be asked to pay a penalty which, however, should not exceed, by regulation, 1% of the financed capital.

Conclusion: should I use a mortgage or a loan for restructuring?

mortgage,loan for restructuring

In reality, everything is in relation to how much you need to invest in the restructuring that you want to implement on your home.

If you want to carry out more substantial jobs that require a greater economic investment and you are not in a particular hurry, given the long bureaucratic process to be undertaken, then it is more convenient to resort to a mutual restructuring.

In this case the amount granted is 80% of the value of the house after the renovation works and the interest rates applied are lower than those for a loan.

If, on the other hand, the jobs to be performed are small and perhaps in a hurry, even if with slightly higher interest rates it may be more advantageous to request a restructuring loan.

Among other things, the latter can be granted in much shorter times without having to involve notary practices.