People take loans for several reasons. It can be due to a home renovation, wedding, meeting high educational expenses, sometimes for medical emergencies, etc. And for this reason, there are different types of loans serving various purposes.
Which loan is the best for you?
Among them, Home equity loans and Personal loans are the most sought after. But before taking any loan, you should know how they work and get yourself informed fully. Having detailed knowledge related to loans and banking is vital so that no one can fool you easily.
A very frequently asked question is between a home equity loan and a personal loan which one is better. Both the loans are capable of solving your financial crunch. However, both of them have specific merits and demerits. This article will try to find the answer to that question.
Home Equity Loans and Personal loans
First, let’s understand the meaning of Home equity loans and Personal loans.
- Home Equity Loan- The loan you get against your home’s equity is known as a home equity loan. It is a secured loan. Collateral is necessary for this type of loan. Thus your house is used as collateral, and for this reason, the interest rates are less. Therefore, if you fail to repay the loan, then the lender might cease your house.
- Personal loan- The personal loans are unsecured. No collateral is required in this type of loan. However, the rate of interest is very high. And you can get this loan only if you have a large amount of credit score. These loans are easy to get, just apply for them and get a loan in minutes.
But before taking any loan, do a bit of research. There are numerous offers you will get related to the loans. Thus look for the right offer and apply for it.
Advantages and Disadvantages of Home Equity loan
- Advantages- You can get a large sum of money if you take Home equity loans. However, you will need to pay a sum of money regularly covering both principal and interest.
- Disadvantages- But it takes a lot of time to get the loan. There is also a high risk involved with this type of loan. If you fail to give back the money, the lender may take your house. Apart from this, there are no other disadvantages of Home Equity Loans. Talk with the banks in Singapore about your needs to get the loan.
Advantages and Disadvantages of Personal loan
- Advantages- You will not have to wait long to get this type of loan. It is much faster than Home equity loans. Therefore it is ideal for taking a personal loan at a time of emergency. And since you don’t need any collateral in this type of loan, there is no fear of losing any asset.
- Disadvantages- These loans are not ideal for huge expenses. The rate of interest is high. And you will need to have a good credit score, without which it is almost impossible to get personal loans.
Ideal circumstances to take Home Equity loans
Since Home equity loans are not easy to get, the following are few crucial circumstances under which you might consider taking this loan.
- You can take this loan if you have sufficient equity in your home.
- If your credit score is low, you can opt to take Home equity loans.
- If you want to pay less interest, you can take this loan. Therefore the amount of money that you need to pay every month will be less.
- It is the best loan to use for home renovation to reduce the interest on your taxes.
- And it is also the right loan for you if you do not have the hurry to get the money immediately.
Ideal circumstances to take a Personal loan
Since people take loans for various purposes, the loans are also made, in a way, to satisfy those needs. If you are new in banking and taking loans, you may have a question: under what circumstances can an individual take a personal loan?
Here are a few crucial circumstances under which you might consider taking a Personal loan.
- Personal loans are the best choice if you want to borrow money for a small expense.
- It is also ideal if you are in immediate need of money, especially for medical emergencies. Unlike Home equity loans, it does not take weeks to get the loan.
- If you do not have the necessary equity, in cases as such, you can take a Personal loan.
- If you don’t want to risk your property in a loan, a Personal loan is a safe option for you.
- Also, if you have an excellent credit score, you can get loans at minimum interest rates.
Research before taking the loan
But before taking the loans, compare the rates and offers given by the different banks and money lenders and then choose what is best for you. In Singapore, many renowned banks offering the best annual rates of interest. All these banks have online websites so; you can get more information from there.
The need for money for any emergency or your wedding or vacation is common. There are many other reasons for which a person might need quite a good amount of money. It is also not feasible to go to your family and borrow money from them every time. For such cases, it is better to take a loan from banks or money lenders.
Thus, a detailed comparison between a Home equity loan and a Personal loan is discussed above. It is up to you to decide which loan will suit you as per your needs. You can get Personal loans and Home equity loans from the best money lenders or the banks, credit unions, and online lenders. Whichever you feel is the safest option for you.