Should I use a personal loan to purchase a home? |
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Answer:
Looking at buying a new or preowned home? Need some Personal loans are appropriate for some things, but borrowing on unsecured credit is not the way to purchase a home. Personal loans are just that; personal. There is no collateral such as a home or property that can offer a lender a guarantee the loan will be repaid, so to balance out the risk, a lender has to have a “safety net” of sorts. This means a higher rate of interest will be paid on the loan. Rates on personal loans can easily run as high as 10 percent, while home mortgage or home equity loans are nearer six percent. Rates will vary from lender to lender, depending on the home mortgage loan options, but when a buyer uses a personal loan, he or she might be faced with paying a great deal more than on a mortgage or equity loan of the same amount. Tax benefits are another important factor for consideration. Interest on a personal loan is not tax deductible like that on a mortgage or home equity loan. Home mortgage interest is often one of the most significant deductions on one’s income tax report. For those shopping for a home, most lenders would recommend borrowing something other than a personal loan. They suggest wise usage of personal loans and taking out a personal loan only if there is a real need. Trackback(0)
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