The personal financing market has made a comeback and is growing at a rapid pace. The market is also witnessing the emergence and rise of an entirely different kind of personal lending platform known as peer-to-peer lending (P2P Lending).
Why a Personal Loan instead of a Mortgage Loan?
That’s all right.
But why do you want to use a personal loan instead of a mortgage loan?
A sensible question indeed!
Here are some situations when a homebuyer might want to seek a personal financing assistance while thinking to buy a home.
- You found a home that has a very low price tag, say below $100,000 or even below $50,000. Not many mortgage lenders are willing to lend such a low amount. This might be because they don’t find such businesses profitable or even cost-effective.
- You have paid down most of the principal balance on a home that you purchased several years ago and now want to refinance on the small remaining balance. You will found yourself in the similar situation as mentioned above.
- The closing cost remains almost the same whether you borrow $50,000 or $500,000. Even if you find someone willing to lend, you would probably not like to spend about 10% of your loan amount in closing cost and other fees.
- Despite low interest rates, mortgage loans are still difficult to obtain, especially when you want to buy an investment property. The extra cost of a home equity or personal loan won’t hurt if you know that the property you are going to buy has a high chance of profit. You can always take a cash-out refinance later to pay off the personal loan balance.
- A personal loan can also help you make a down payment on a mortgage. However, you must note that not many lenders would allow you to use funds borrowed this way.
Where to Find a Personal Loan?
A personal loan lender looks only two things for approval – credit score and paycheck. If you have a regular income and possess a very good credit score, you will probably find no difficulty in getting quick funds.
The following are some of the options.
- Banks: Though it is true that many big banks, such as Chase and Bank of America, are reluctant to offer unsecured personal loans these days, you will still find many helping people with their personal financing programs. Wells Fargo, for example, can offer up to $100,000 in personal loans at attractive interest rates.
- Credit Unions: Check out a credit union in your vicinity. Seek a membership and you will find it quick and easy to meet all your personal financing needs there. A credit union can offer a better interest rate than a bank would.
- Peer-to-Peer Lenders: Many websites have come up to provide a direct link between an investor and a borrower. You are likely to find someone willing to offer you a loan for your home-buying need. Note that the maximum loan amount seldom exceeds $25,000.