Comparing two popular lending options and breaking down the differences between a home equity line of credit and a personal loan.
Planning a big home renovation? Want a little extra cash on hand to prepare for the unexpected? Looking to book your next fun-filled getaway? No matter the reason, there are a variety of financing options available to fund your future plans.
Two popular options are a home equity line of credit (HELOC) and a personal loan. Both are great choices, but finding the right fit for your personal situation is key.
Why choose a HELOC?
If someone asked you to borrow a very large sum of money, would you want to see some sort of collateral as an act of good faith? For some people, this would be a hard “YES.” With a HELOC, you’re doing just that – borrowing against one of your largest assets (your home) provides the bank with more security.
Typically, the Annual Percentage Rate (APR) that you receive with a HELOC is considerably lower than that in which you’d receive with a personal loan This means that you’ll pay less interest over time. According to Bankrate, “You might see home equity rates as low as 4-8%, while a personal loan interest rate could range from 5-36%.”
There are many other benefits of a HELOC. For instance, with a HELOC you only pay for the portion of the line of credit that you use, and the line remains open for you to utilize for other expenses. And, since you’re using your home as collateral, you can generally borrow larger amounts of money than a personal loan.
Plus, for a limited time, you can get a low 3.25% APR for the first 12 months on a Lake Shore Savings Bank HELOC. After the first 12 months, the rate is adjustable.
Why choose a personal loan?
If you’re not a homeowner, a personal loan could be a reasonable option for your lending needs. Although the rates may be higher, a personal loan is unsecured – so you don’t need any collateral. These types of loans provide the same flexibility, so you can use the funds for everything from school expenses to debt consolidation and beyond.
Unlike some HELOCs, a personal loan usually has a fixed APR, therefore your rate will remain the same throughout the duration of the loan. With a personal loan’s fixed rate, reapplication is necessary if additional funds are needed by the borrower. Another plus of a personal loan is that you can usually obtain your funding fairly quickly.
Why not learn more today?
At Lake Shore Savings Bank, our lending specialists make sure that you’re getting the all the information that you need to make the right decision, ensuring that you find the best product to fit your unique situation.
If you’re ready to explore a HELOC or another lending option, call or stop by your local branch today to chat with one of our experienced on-site loan specialists.