Learning Center

Other Borrowing Approaches

Quick Comparison of Borrowing Options

Borrowing Considerations

If you are considering borrowing to meet your objectives, you will have to go through a series of steps as part of the borrowing process:

Make sure you explore other alternatives before deciding to borrow money.
Take a look at your current debt situation to see if you can financially handle more debt.
Once you decide to borrow, look at all the different sources of funds that are available to you.

The table below summarizes aspects of different ways you can borrow money.

Source of Funds	Interest Rates	Fees	Availability	Tax-Deductible Interest	Risk Factors
Refinance Home Mortgage	If market rates are lower than your current rate, consider this option.	Varies	Fairly easy	Generally yes	Risk of losing home if in default
Home-Equity	Typically lower than most other loans	Low	Easy	Generally yes	Risk of losing home if in default
401(k) Plan	Fairly low	Minimal, if any	Easy	Generally no	Risk of depleting retirement fund
Margin Loans	Fairly low	Minimal, if any	Easy	No, unless money is used to purchase investments	If market value of collateral declines, you may have to make up the difference in cash
Life Insurance	May be low	Depends on insurance company	Easy if you have sufficient cash value in your policy	Generally no	If loan is not repaid, death benefits will be reduced and interest on unpaid amount will continue to compound.
Business Loan	Moderate	Depends on purpose of loan	Limited	Yes	Business assets may be at risk
Secured Personal Loan	High	Minimal	Limited	Generally no	Collateral at risk
Unsecured Personal Loan (e.g. credit cards)	Highest	Minimal	Limited	Generally no	Temptation to mount up expensive debt quickly
Relatives or Friends	Varies	None	Limited	Generally no	Jeopardize relationships