This table summarizes the pros and cons of different ways of borrowing money. When you're looking at more than one borrowing option, you can use this table to evaluate them against each other.
WHAT'S THE BEST WAY TO BORROW?
Source of Funds
Refinance Your Home Mortgage
If market rates are lower than your current rate—check it out
If you stay in the home long enough, you will eventually break even.
Risk of losing home if in default
Typically lower than most other loans
Generally, If used to "buy, build, or substantially improve" the home that secures the loan
401(k) Plan (If Available)
Little, if any
Risk of depleting retirement fund if you leave and cannot pay the loan back. There is also an "opportunity" cost when market is rising. Additionally, the loan may be considered a taxable withdrawal if still outstanding when employment ends.
May be low
Depends on insurance company
Easy if you have sufficient cash value in your policy
If loan is not repaid, proceeds at death will be reduced and interest on unpaid amount may continue to compound.
Depends on purpose of loan
Business assets may be at risk
Secured Personal Loan
No, unless money is used to purchase investments
Collateral at risk
Unsecured Personal Loan (Credit Cards)
Temptation to accumulate expensive debt quickly
Relatives or Friends
Difficult to find a willing lender
Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC. Insurance products are offered through LPL or its licensed affiliates. Premier America Credit Union and Premier America Investment & Retirement Services are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Premier America Investment & Retirement Services, and may also be employees of Premier America Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of Premier America Credit Union or Premier America Investment & Retirement Services. CA Insurance License #0759204, TX Insurance License#1643255.
Securities and insurance offered through LPL or its affiliates are: