What is a home equity loan? All you need to know

Sometimes, raising the money to buy or build your dream home can seem daunting, but with an internal loan, you can be so sure of getting your dream home soon. You may be wondering, what is a home equity loan and how does it work? Okay, in the next few lines I’ll show you.

The money lending process went through several stages of democratization and, as a result, the big banks had a monopoly on selling quality credit products.

Fortunately for all of us, technology has helped us find alternative loan options. Internal loans and financing are one of these options.

This option helps a business offer greater payment flexibility and helps them get more business even when customers don’t have all the money to pay upfront.

Interestingly, this practice helps keep customers by helping them get what they need on terms that work for them, without having to deal with brokerage fees and commissions.

Here in this article, you will learn more about what an internal loan is. Keep reading.

In the meantime, here’s the table of contents below for an overview of what to expect in this article.

What is an internal loan?

Internal financing is a type of loan offered by a business directly to a customer, allowing them to purchase goods and services offered by the business.

Usually, this type of financing eliminates the need to secure a loan through a financial institution.

A typical analogy of how internal loans work is this: If I want to buy the latest Ford Edge which costs around $ 38,100 and I don’t have the full money, what I will simply do is contact the Ford Automobile Company for an internal loan.

The company will review my application to see if I am creditworthy. Being creditworthy means whether they can pay back the money. They would like to know if I have a steady stream of income to pay back the money.

If I fulfill whatever they require from me, I will be given the amount of money I want so that I can buy their product.

Which is better between internal financing or bank?

Which is better between taking out a loan from the bank and taking out a home equity loan? Oh well, both are great ideas to take if you’re looking for a loan.

So the choice you make largely depends on what your repayment plan is. If you don’t want to repay the money soon, then you should take out a bank loan. Usually, domestic loans have shorter repayment schedules.

So the main difference between bank financing and internal financing is that bank loans have longer payment terms while internal ones are shorter.

You can choose to pay off the bank loan in just five years, or up to 20 years, while the internal loan allows you to pay with a maximum duration of five years.

Is internal financing a good idea?

Yes, as you might guess, it is absolutely a good idea to apply for an internal loan. You will find out why I say this. Just make sure you follow me very closely.

Pros and cons of internal loans

Here, in this section, we will look at some of the advantages and disadvantages of taking out an internal loan. Just follow.


Below are some of the benefits of hiring internal finance.

  • Internal loans require little paperwork 
  • There are usually greater chances of loan approval 
  • It is very convenient to log in


  • They have high-interest rates
  • They have a shorter loan settlement period


You might consider getting this type of loan if you are planning to get a property or product from a business or organization.

For the most part, take out internal loans if you want to buy things like cars and houses.

Interestingly, the emergence of tech companies and mobile apps, store financing makes the financing process immediate and easier.

In summary, it won’t be out of place to take this loan on the next major asset you want to acquire; a car or a house.

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