In this article, we’ll cover the benefits and disadvantages of home equity loans, home equity lines of credit (HELOCs) and personal loans. Whether you’re looking for funds to finance a major expense or simply pay down consumer debt, this article can help you decide what type of financing is best for you.

Home Equity Loan

* Best for: Major, unexpected expenses or large investments.

* Not for: Ongoing or smaller expenses.

How it works: A home equity loan is like a mortgage – the borrower is given a lump sum of money up front and begins paying interest and principal payments right away to work off the debt. The amount of the loan extended to the borrower is based on how much equity has increased in the home after appreciation and mortgage payments.

* Pro: Home equity loans typically offer a lower, fixed interest rate than HELOCs and personal loans. This benefits the borrower over the term of the loan as well as in the short term.

* Con: Borrowers have to pay interest on the full balance right away.

Home Equity Line of Credit (HELOC)

* Best for: Ongoing expenses like major renovations, college tuition or having a baby.

* Not for: Single, major expenses.

How it works: A home equity line of credit is secured by the equity in your home, and you can draw on it as you would using a credit card or savings account. Typically, the rate is adjustable – meaning it can be changed periodically depending on financial market trends – and you’ll make interest payments on what you borrow until the term of the line of credit is over.

* Pro: You only pay for what you borrow, and these loans are often easier to qualify for and faster to obtain than home equity loans.

* Con: The interest rate is adjustable and often higher than a home equity loan. When shopping for a home equity line of credit, look for a low permanent rate.

Personal Loan

* Best for: Small single expenses like a new car or small business investment.

* Not for: Ongoing living costs, major projects like home renovations.

How it works: A personal loan is a one that is offered by the lending institution and is often secured by the piece of equipment (e.g. a car) or property (e.g. business) that you’re using the loan to purchase. Typically, personal loans are smaller and can often be obtained in the form of a line of credit.

* Pro: Simple application process without sacrificing home equity or risking the home itself.

* Con: Without the security of home equity, the interest rates on a personal loan are often higher, so it is advantageous to pay off the loan as quickly as possible.

In short, whether you obtain a home equity loan, a HELOC or a personal loan will depend on why you need to borrow the funds, the kind of interest rates you can afford and your own current financial situation.

Remember, always shop around for the lowest interest rate! Doing so can save you hundreds – if not thousands – of dollars over the life of the loan.

When you find yourself in need of urgent cash for an emergency situation, you have several options which you can avail. However with the several options come several advantages and disadvantages along with it. In this article, we highlight the difference between of credit cards and personal loans and the benefits which include rewards points and personal loan interest rates, etc.

Interest rate

A personal loan and credit card gives you the funds at will. However, the advantage is that personal loan interest rates are much lower than credit cards. When you sign for a personal loan, the interest rates are fixed for the entire repayment tenure, and therefore it will not fluctuate. Using a personal loan EMI calculator, you can finalize on the affordable interest rate, repayment tenure and EMI to suit your monthly cash flow. Comparatively, the personal loan interest rate is substantially lower than the interest rates on credit card debts. With a credit card, your payment tenure and interest rates will tend to fluctuate and the banking institute will have the first say in the repayment tenure, EMI and the interest rate.

Documents needed

The application process for the credit card is not as long as the application process for the personal loan. While you will need to submit secondary essential documents when you are applying for a personal loan, you can avail the credit card debt by withdrawing the funds from the nearest ATM with your credit card. Also the processing time for the personal loan and the credit card is different. The personal loan may be the quickest loan application, but compared to the credit card, it takes longer. The credit card application takes a mere few days, after the document submission, but the once you own a credit card, you can avail the debt anytime you like. On the other hand, the personal loan will only be accepted if the all the documents are verified and your repayment ability is established. There is also a slight chance that your personal loan application may be denied due reasons like credit history.

Monthly payments are different

The repayment tenures are different for the personal loan as well as the credit card. While the personal loan involves sticking to a monthly budget which is easier for most individuals with a fixed income, repayment for a credit card is very tricky. With a personal loan EMI calculator, you can decide the personal loan interest rate, EMI and the duration of payments as per your convenience. However, with a credit card, you do not have that privilege. Therefore you have a more luxurious and convenient repayment tenure for a personal loan than a credit card

Benefits included

You can earn a lot of benefits and rewards with a credit card. While you can collect reward points and travel bonuses with a credit card, and redeem them for future gifts and benefits, there are no remunerations with a personal loan.

The best thing to do is to get a Federal student loan. Federal loans are readily available to students. Private loans are more expensive to pay back and are not recommended if they can be avoided.

The reason Federal student loans are so available is because graduates of college will usually make a lot more money than other people. This gives the lenders confidence that their money will be repaid.

Some of the most positive aspects of Federal student loans are: lower interest rates, options to postpone payments, longer repayment terms and easier credit requirements. Eligibility for some of these loans is need based, while others are not.

The most common Federal student loans are: Federal Perkins Loans are a low-interest loan available to students who have financial need based on information from their FAFSA. Federal Stafford Loans are available to undergraduate and graduate students.

The loan amounts depend on a student’s year in school and whether they are financially dependent or independent. These loans can be subsidized or unsubsidized. Financial need determines which type a student is eligible for.

Unsubsidized loans are available to all students, regardless of income. Next, the Federal PLUS loans (Parent Loan for Undergraduate Students) are a low-interest education loan for parents.

Each year, parents can borrow up to the cost of attendance, minus other financial aid received such as scholarships, grants, student loans, etc. The PLUS loan is not based on financial need. Applicants must pass a credit check.

Private loans are designed to supplement Federal loan programs and are available from schools, banks, credit unions, and education loan organizations. They are usually used to cover education costs that cannot be met by Federal aid.

Terms for private loans very according to the lender and your credit history. Private loans have credit requirements and you many need a co-signer. Private lenders have control of the money they are loaning to you and may not offer deferment options.

The lender determines the interest rates and fees according to your credit history. Private loan programs may offer the borrower benefits, such as interest rate discounts, rebates and other incentives.

One thing is for sure; all lenders want your business because they make money that way. No matter what type of loan you take out, be conservative and borrow wisely. All loans have to be repaid rather they are Federal or private loans.

A personal loan is an ideal way to ensure that your financial problems are instantly met. However there are certain parameters which are considered when you consider the loan. This includes the tenure, amount and especially the personal loan interest rate. In this article, we give you the advantages and disadvantages of floating interest rates and fixed interest rates.

Market Conditions
The market conditions play an important role in impacting the personal loan interest rate, as it forms the base rate for any interest rate. For the fixed interest rate, the base percentage rate is fixed throughout the period of tenure without any fluctuating changes. However, for the floating rate, the changing market conditions impact it the most. Based on the current and future market changing scenario, the rates are planned for the floating interest. Therefore, for the first few months the rates will be higher and then proceed to be lower or vice versa, which may enable to pay more you should.

Stability
A personal loan is fixed for a period of certain tenure that can last anywhere between a year to more. A platform of stability is created if you are well prepared with the loan you would like to take, along with the tenure and the personal loan interest rate. While the fixed interest rate will provide you with a secured tenure a floating rate may not provide the same level of stability. The unpredictability of the changing market rates makes the floating rates more unstable depending on your income and other selected factors.

Percentage of Rate
The personal loan interest rate is different form the fixed rates and the floating rates. While the floating rate is lower than the fixed interest rate, it helps you save during the tenure of the period, as it may rise only a percent or two percent more in the latter half of the tenure. However, with the fixed interest rates you will have a steady interest rate throughout the tenure and thereby spending more than you should when you can save.

Tenure
The length of the tenure plays an important role in the interest rates for personal loan. If you choose a fixed interest rate for a certain period, you will have to pay a steady fixed amount for that whole tenure. However, with a floating interest rate, you can adjust to pay a higher interest in the former months with a lower amount in the latter months, or even vice versa. In this way, you can reduce at least 6 months as compared to the fixed interest rate tenure. Thereby if you take a personal loan which has a long tenure over 15 years, you can reduce it with a floating interest rate.