Home equity loans have long been regarded as probably being one of the lowest interest loans that you can rather easily get, if you own a home and have been in it for a while. Recent economic problems in our country, however, have resulted in people finding new ways to get a loan. Personal loans may be the new best way to obtain cash instead of a home equity loan.
Home equity loans are not as easy to get as they used to be. With banks extending credit less frequently and with more stringent requirements, there is little doubt that a personal loan would be much easier to obtain. While home equity loans can eat up your equity, they also are generally lower in interest than other types of loans – which is why they have long been the preferred choice.
The advantage of getting a personal loan rather than a home equity loan is that they can be obtained easily – and quickly. In fact, you could probably get a personal loan in just a couple of hours and have instant access to all of the cash. Smaller personal loans may not even require any collateral, especially if you already have an account with the bank.
Another available choice is to get a personal line of credit. This would be similar to the home equity line of credit in that you are allowed to draw against the account money as you need it, up to a specified limit. For some, a personal line of credit would be the better choice because you may not know how much you will need, for things such as remodeling projects, adding on a new room, etc. Some lenders will let you borrow as low as $1,000, or as much as $25,000, or more.
There are two main types of personal loans. The first kind is an unsecured personal loan. This kind does not require any collateral, but you will have to pay a higher interest rate on it. The interest rate will usually be higher than most other types of loans. Although some banks will give larger loans, about $15,000 will be the maximum amount for most lenders for this type of loan.
The other kind of personal loan is a secured personal loan. This kind does require collateral and it will enable you to get lower interest rates than an unsecured loan. You will also be able to get a much larger personal loan if you put down some form of collateral on it, such as a house or car.
A home equity loan will give you two advantages over personal loans. The first advantage is that it will give you a tax break because it may be tax deductible, says Consumer Tips Reports.com. This will enable you to lower your taxes. The second advantage is that a home equity loan will enable you to get very low interest rates, as long as your credit is good, and you will only pay interest on the amount you actually borrow. The downside of a home equity loan is that if you don’t pay your bills, you could lose your house, which is another reason a personal loan may be the better choice for some people.