If you have an on-going emergency that requires you to access money over a period of time, then you may need to think about borrowing money. Personal loans are ideal in this situation, but there are a few different types that you may want to look at. Keep reading to learn about a few types that you may want to look at.
Personal Credit Line
Most people understand that it is unwise to use credit cards for emergency situations that require a great deal of money. Interest rates on credit cards are high and will often exceed 16% and sometimes will exceed 30% if you have poor credit. Personal loan rates typically start at about 10% and will only exceed 28% if you have extremely bad credit.
Unlike a typical personal loan, a personal credit line will give you access to a specific sum of money that you can use. You will not receive a lump sum, like a loan, but you will be able to access the money over time. Like a credit card, you will be asked to pay a minimum payment, and you must do so until you pay back the money you borrowed.
Personal credit lines stay open as you pay back the amount borrowed. This means that the loan is not discharged if your balance is paid off and you can continue to borrow money. While the interest rate is lower than that of a credit card, it is higher than other loan types. The credit line is not secured, meaning that you do not use collateral to secure it. This is why the interest rate is higher, but it is often ideal if you do not want to use your home to secure a loan.
Home Equity Loan
Many people will use home equity loans when they intend on making home improvements. However, the loan does not have to be used for home repairs. The loan merely allows you to tap into the value of your home that exceeds what you owe on the house.
Home equity loans can provide you with a large sum money. They also have lower interest rates, like those of traditional loans. You will need to use your home as collateral, but you will essentially be placing a second mortgage on your home.
In some cases, a line of credit can be extended instead of a traditional loan. This means that you get the advantage of having access to money and a low interest rate, but you do not have to pay large payments if you do not use the money right away.
If you want to know more about the types of personal loans that you can acquire, speak with a loan officer.Share