Odds are good that you’ll find yourself needing access to more cash than you have on hand at some point. That’s just life. Whether you want to fund a home-renovation project, consolidate higher-interest debt or cover unexpected expenses, there are several ways you can borrow the money you need.
Two of the most popular ways to borrow money are home equity loans and personal loans (secured and unsecured). In this post, we’ll take a look at the pros and cons of each of these, and give you tips and tools to help you decide which one is right for your needs.
How borrowing equity from your home works
HELOCs and other home equity loans are popular choices for homeowners looking to access significant amounts of cash. At their heart, they are loans secured by the borrower’s accumulated home equity. This gives home equity borrowers several significant advantages. To start, home equity loans can be significantly larger than personal loans, up to $2,500,000 in some cases. Also, they often feature lower interest rates than personal loans.
One noteworthy disadvantage of borrowing equity from your home is that, in the event you default on the loan, the lender has the option to foreclose on your property.
See if you qualify for a home equity loan
California Bank & Trust offers HELOCs ranging from $10,000 to $2,500,000. If you think a HELOC or home equity loan is a good fit for you, use our home line of credit calculator to see how much you may qualify for.
Personal loans and how they work
If you aren’t yet a homeowner (home mortgage rates in California are currently keeping many potential buyers out of the market), or don’t have sufficient equity built up to satisfy your borrowing needs, a personal loan can often be a good choice. There are a few varieties of personal loans to consider, including secured personal loans, unsecured personal loans and unsecured lines of credit.
Secured personal loans
If you have a savings account or Certificate of Deposit, you can use those as collateral for a secured personal loan. One advantage a secured personal loan has over home equity loans is that you can borrow as little as $500, whereas the minimum for a home equity loan is often as high as $10,000. The maximum for a secured personal loan is in the $250,000 range. Another advantage is that interest rates are often fixed, whereas interest rates on HELOCs can fluctuate with the market.
Unsecured personal loans
If you do not have collateral available, you may qualify for an unsecured personal loan. Interest rates and loan minimums can be higher, while borrowers are limited to a maximum loan amount of $100,000. However, like secured personal loans, unsecured loans feature fixed interest rates that offer payment predictability for the life of the loan.
Unsecured lines of credit
Whether you need to pay for unexpected car repairs or want to take a well-deserved vacation, an unsecured line of credit can give you access to the cash you need. If you qualify, CB&T offers unsecured credit lines from $2,500 to $100,000 with variable rates. Like a HELOC, you only pay interest on the funds you actually use.
The choice is yours
Life can throw you a curve ball, or an opportunity, at any time, and it’s a good idea to have access to extra cash when it does. Whether you choose to borrow against your homes equity or similar, a home equity loan or a personal loan will depend on several factors including your homeowner status, personal credit history, and the amount you want to borrow. Find out more online, or call or visit your CB&T branch for more information.