The Difference between a Home Equity Loan and a Personal Loan
A considerable number of people have taken a loan in the past for one reason or another. In fact, the fact that so many people are in debt in America makes consumers yearn for better education on loans. It is important to note that any loan applicant should be cautious because not all loans are good for everyone. There are two types of loans; home loans and personal loans. Read on to learn some of the facts you should know before you decide to apply for either a home equity loan or a personal loan.
Since many people are overwhelmed by daily expenses, personal loans have gained popularity. Most of these expenses creep from nowhere and they require immediate attention. Remember that most personal loans are not secured. Personal loans have a specific duration and repayment plan. They are likely to be riskier because there is nothing that secures them, making them have higher interest rates. If you are going for a personal loan, ensure that you have a good credit score to be eligible and get a better interest rate.
For a home equity loan, you will qualify depending on the difference between your home’s value and the current balance of your mortgage. Once you are approved of the loan, you’ll get the whole lump sum which you will pay back over time subject to a fixed interest rate. The application process of this loan is not different from that of the first mortgage. Since they are secured, you are likely to get a lower interest rate compared to a personal loan. Although there are several lenders, speak with more than one lender to see if you can get a better rate.
What are the benefits of personal loans? One of the advantages of personal loans is that when you have a good credit score, you can get approved pretty quickly because you don’t have to wait for appraisals and approvals. Anyone can get a personal loan whether you own a home or not. For those who own a home and can’t go for a home equity loan because of the dangling value, a personal loan is a better option.
A home equity loan is also advantageous because they have lower interest rates. Once you’ve decided which loan to go for, you should find a reputable lender. For an insight into the best lender, read more here. You probably need adequate information about personal finances as discussed here. You will be sure to get the best loan for you if you consider the above-discussed points.