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If you worried about getting credit to tide over an emergency, there are plenty of
financial service providers, offering many options. A hasty decision could however land you into a financial mess; therefore, evaluate your requirements well in advance, and compare the available options to check which one would best suit your needs. Given below are some popular credit options and various pros and cons related to them:
Credit Cards
Today, credit cards are most prevalent and are amongst most popular credit options available in the market. There are plenty of financial service providers, offering a number of products, for you to choose from. You can these credit cards for almost all the purposes from paying your grocery bill to booking airline tickets. When a financial service provider/credit card company issues you a credit card, it sets a specific credit limit for you, after verifying your income details and various other factors. You can go on borrowing until your limit is met.
You must shop for a card that has low interest rates and additional features such as reward points or cash back facilities. Preferably, obtain a
credit card from a reputed financial services provider, as the brand name card assures you of a good deal, at a good interest rate.
Home Equity Loans These loans are among the favorites of the tax payees, as they are cheap, easily available, and offer tax deductions on the interest component. Today, almost all financial services providers engaged in home loans are offering
home equity loans.
In such an option, you can benefit from a loan against your house (lien or second mortgage). It is a very good option because of the prevailing low interest rates. People, however, take such loans for granted and repay them leisurely, which offset the advantages that you would reap if you repaid them fast. Instead, you must continuously look at opportunities of refinancing your home equity loan, to save a portion of your interest charges.
Retirement FundsYou must seek for this particular financial service only when all other options are closed. Interest on such loans is not tax-deductible. If you fail to repay such a loan within the stipulated time (mostly five years), the financial services provider is likely to charge you heavy penalties and taxes. Moreover, if your resign from your duties at office, the employer holds the right to call such a loan full; this could cause considerable financial distress.
Life Insurance Did you know that you can borrow against your life insurance, if you have a whole policy? Here, you have the option of not repaying the financial services provider. However, it is wise to repay, otherwise, the loan amount is deducted from the benefits payable by the insurer to your beneficiaries.
Credit UnionsIt is wise to borrow from a credit union, as they offer very low interest rates and fees. If do not belong to one, check with your employer (if applicable), if you can join one. Whichever option you choose, make sure that you negotiate with your lender well to get the best deal. In case, you are considering borrowing from friends or relatives, obtain all the terms and conditions in writing to avoid hiccups later on.
