Often when a person needs to borrow, they find that they are unable to borrow the full amount that they require.
Therefore, although loans are available for his specific purpose there would be quite a short fall of funds.
This necessitates the need for the prospective borrower to have money himself to buy the thing that he wants.
An example of this is when someone wants to purchase a vehicle, such as a car or a motor bike when it is only possible to obtain a loan of up to normally 70% of the value of the vehicle, and sometimes it is even less than this.
This means that if someone wants to buy a car costing 15,000, the money to be paid out of the buyer’s own pocket would be 4,500, which is pretty substantial.
It is normal for a car buyer to trade in his old car, which may or may not be worth enough to cover the deficit, and sometimes there is no trade in available and the buyer must fund the difference from his own money.
When buying a holiday home, the mortgage available is normally a maximum of 70% or there abouts of the value of the property, and again a substantial amount must be paid by the buyer. On even a run down, renovation required property in Burgundy, you are talking about needing 13,000 or more of the buyers own money.
The persons own money is not always required..
When a homeowner has equity on his property he can take out either a remortgage or a secured loan that he can use for almost any purpose and this will pay for the complete cost of the the car or the holiday home.