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How Does Home Equity Financing Compare With Personal Loans?
By Michael Pressman
TD Residential Lending Product Manager
When you're deciding between a home equity loan or line of credit and an unsecured personal loan, consider how much cash you need, and how you plan to use the funds. With a personal loan, you'll be provided with funds up front in a single lump sum—usually $2,000 to $50,000. This is an important consideration as some expenses, such as a vehicle purchase can exceed this amount. Both home equity financing options and personal loans can be used to pay for most anything but it's worth noting that personal loans will typically carry higher interest rates. This is primarily because the loan is not being secured against any collateral (like your home). However, this may be appealing for some borrowers, especially those who do not own their home.
Home equity loans and lines of credit financing pros and cons
Personal loans financing pros and cons
When to choose home equity financing
Home equity financing may be the best option if you'll need access to more than $50,000 or are financing a project that has unknown costs. Coupled with their low, variable or fixed rates, home equity financing can prove to be a great option. Keep in mind that as you'll be borrowing against the equity in your home, homeownership is required and at times there may be closing costs and fees with this type of financing.
When to choose a personal loan
Personal loans may be the best option to help cover an unexpected expense if you are not a homeowner with available equity. Also, you can usually get quick approval and funding from most lenders within just a few days. No home ownership and speed are two reasons why personal loans have an advantage over home equity financing – especially for one-time expenses.
Home equity financing series
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