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Personal loans vs. home equity loans: Which is better now?
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High interest rates have driven up borrowing costs over the last three years. That’s an unfortunate reality if you have variable-interest debt or want to take out a loan. The tide, however, is beginning to turn.
“There is a near-universal expectation that rates will come down over the remainder of the year as inflation continues to moderate towards the Fed’s preferred 2% target and the employment market cools, easing fears of wage-based inflation,” says Josh Lewis, certified mortgage consultant with The Educated Homebuyer podcast.
With rate drops on the horizon, borrowing will again become more affordable. But which loan product is best this fall? While home equity loans are likely top of mind if your home value spiked during the pandemic, personal loans are sometimes the better choice. We asked some financial experts for their recommendations, which we detailed below.
See what home equity loan interest rate you could qualify for here now.
Personal loans vs. home equity loans: Which is better now?
The costs of both loan types will come down as rates drop, so whether a personal loan or home equity loan is better this fall will depend on the details of your situation.
When is a personal loan better?
A personal loan may be better in the following scenarios:
- You don’t want to put your home at risk: You may prefer a personal loan due to the lien requirements of home equity loans. “If a person defaults on a personal loan, that doesn’t have any ramifications for their home, whereas a home equity loan default can jeopardize a person’s residence through foreclosure,” says Shmuel Shayowitz, president and chief lending officer at Approved Funding.
- You need money fast: Brian Mollo, the chief executive officer of Trusted House Buyers, explains that a personal loan can be a better option when you need funds fast — such as when you’re covering an emergency expense. “Personal loans often have faster approval and funding processes, which could be crucial if you need money quickly,” adds Lewis.
- You have good credit and want to avoid fees: Home equity loans typically come with closing costs that range from 2% to 6% of the loan amount. Personal loans don’t have closing costs but sometimes come with origination fees which can be as high as 12% of the loan amount. However, you may qualify for a personal loan without any fees if you have good or better credit.
- You need to borrow $10,000 or less: “If you need a smaller amount of money for a short period (one to seven years), and you plan to pay it off quickly, the concern of a higher interest rate might be offset by the speed and ease of getting a personal loan,” Lewis says. Jeremy Schachter, branch manager at the Fairway Independent Mortgage Corporation, agrees. “If you are looking for a small amount to quickly pay back (under $10,000), I would recommend a personal loan over a home equity loan,” Schachter says.
Start exploring the top personal loan options available to you online today.
When is a home equity loan better?
Next, here’s when experts say a home equity loan can be better:
- You want the lowest interest rates: “Home equity loans typically offer lower interest rates, around 7% to 9% compared to 10% to 12% or more for personal loans. If rates come down as expected, a home equity loan will likely remain more affordable,” Lewis says. Further, you could opt for a home equity line of credit (HELOC) with a variable interest rate and benefit each time rates drop. “In a decreasing rate environment, you can take the variable rate, likely tied to Prime, and enjoy the ride down every time the Fed cuts rates,” says Lewis.
- You want lower monthly payments: Home equity loans also tend to have longer repayment term maximums, up to 30 years, while personal loan terms typically fall between one and 10 years. “The longer repayment terms of a home equity loan can make monthly payments more manageable, particularly if you expect rates to decrease and want to keep payments manageable with the hope of refinancing later,” Lewis says.
- You have a lot of equity and need a larger loan amount: “Home equity loans can offer access to larger loan amounts, making them ideal if you need significant funds for home improvements or consolidating higher-interest debt,” says Lewis. For example, most home equity lenders let you borrow around 85% of your home’s value. That could equate to a six-figure sum, depending on how much home equity you’ve accumulated to date.
The bottom line
The better loan product for you this fall depends on multiple factors. “While a home equity loan usually offers more benefits in terms of lower interest rates and higher borrowing limits, a personal loan can be advantageous in certain situations, particularly when quick access to smaller funds is needed, or when you want to avoid putting your home and equity at risk,” Lewis says.
To find the best fit, consider the above factors and run the numbers.
Both personal loans and home equity loans can have large impacts on your financial situation. If you have any questions or want personalized guidance, consider consulting a certified financial advisor. They can help you explore the pros and cons of both options in more depth.
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Earth will get a second moon for about two months this year when a small asteroid begins to orbit our planet. The asteroid was discovered in August and is set to become a mini-moon, revolving around Earth in a horseshoe shape from Sept. 29 to Nov. 25.
Researchers at the Asteroid Terrestrial-impact Last Alert System, an asteroid monitoring system funded by NASA, spotted the asteroid using an instrument in Sutherland, South Africa and labeled it 2024 PT5.
Scientists from the Universidad Complutense de Madrid have tracked the asteroid’s orbit for 21 days and determined its future path. 2024 PT5 is from the Arjuna asteroid belt, which orbits the sun, according to their study published in Research Notes of the AAs.
But Earth’s gravitational pull will draw 2024 PT5 towards it and, much like our moon, it will orbit our planet – but only for 56.6 days.
While other non-Earth objects – or NEOs – have entered Earth’s orbit before, some don’t complete full revolutions of Earth. Some, however, do and become so-called mini moons.
An asteroid called 2020 CD3 was bound to Earth for several years before leaving the planet’s orbit in 2020 and another called 2022 NX1 became a mini-moon of Earth in 1981 and 2022 and will return again in 2051.
2024 PT5, which is larger than some of the other mini-moons, will also return to Earth’s orbit – in 2055.
Earth’s gravity will pull it into its orbit and the asteroid will have negative geocentric energy, meaning it can’t escape Earth’s gravitational pull. It will orbit around earth in a horseshoe shape before reverting back to heliocentric energy, meaning it will rotate around the sun again, like the other planets and NEOs in our galaxy.
Even after it leaves orbit, it will stay near Earth for a few months, making its closest approach on Jan. 9, 2025. Soon after, it will leave Earth’s neighborhood until its path puts it back into our orbit in about 30 years.
The study’s lead author Carlos de la Fuente Marcos told Space.com the mini-moon will be too small to see with amateur telescopes or binoculars but professional astronomers with stronger tools will be able to spot it.
CBS News has reached out to Marcos for further information and is awaiting response.
Washington — An Alaska man was arrested Wednesday for allegedly threatening to assassinate six members of the Supreme Court and harm two family members, the Justice Department said.
Panos Anastasiou, 76, is accused of sending more than 465 messages to the Supreme Court through an online portal, which included violent, racist, and homophobic rhetoric, according to court filings. Anastasiou allegedly threatened to assassinate, kidnap, torture, hang, behead and execute the justices, and encouraged other people to join him in committing acts of violence, the Justice Department said.
He faces nine counts of making threats against a federal judge and 13 counts of making threats in interstate commerce. Anastasiou appeared before a federal magistrate judge Wednesday and pleaded not guilty.
“We allege that the defendant made repeated, heinous threats to murder and torture Supreme Court Justices and their families to retaliate against them for decisions he disagreed with,” Attorney General Merrick Garland, a former federal appeals court judge, said in a statement. “Our justice system depends on the ability of judges to make their decisions based on the law, and not on fear. Our democracy depends on the ability of public officials to do their jobs without fearing for their lives or the safety of their families.”
The Supreme Court declined to comment on the charges. An attorney for Anastasiou was not listed in court records.
The targeted justices are not named in the indictment and identified only as “Supreme Court justices 1-6.” Charging documents state that some of the threats allegedly made by Anastasiou “were intended to intimidate” the justices and “retaliate against them for official actions” they had taken in their capacity as judges.
The messages were sent between January and July, when the Supreme Court ended its term, court documents.
In one of the messages, sent Jan. 4, Anastasiou allegedly threatened to murder one justice by “providing the rope” to “hang … from an Oak tree.” Another on May 10 included a threat to kill the same justice by “lynching.”
Court filings state that in a May 16 message referring to a second member of the Supreme Court, Anastasiou allegedly threatened to kill the justice by “putting a bullet in his … head.” The Justice Department said a message sent the following day was targeted not only at the first two justices, but also two unnamed family members and warned of sending “fellow veterans” to “spray” their houses with bullets with hopes of killing them.
The Supreme Court has a 6-3 conservative majority and has come under immense criticism in recent years for decisions on politically charged issues including abortion, guns and presidential power. In its most recent term, the six conservatives voted to find former President Donald Trump is entitled to immunity from federal prosecution for official acts undertaken in the White House.
Its June 2022 decision unwinding the constitutional right to abortion was highly criticized and led to protests outside the homes of several conservative justices, including Justices Samuel Alito, Amy Coney Barrett and Brett Kavanaugh. A California man was arrested in June 2022 after he was found outside of Kavanaugh’s Maryland house with a gun, knife and various tools, and charged with threatening to assassinate the justice. He pleaded not guilty.