Saturday, May 25th 2019

Personal Finance

Personal finance debt comes in several different flavors. Here are some of them with an explanation:

1. Credit Cards: This is generally the worst choice. The interest rate is not fixed, the interest rate is high, there are hidden fees and it is not tax deductible. Because of lax approval standards, however, it is easy to get and it is easy to use so it is very popular.

2. Securities-based Lending: Also called margin, the investor borrows money versus his portfolio of financial securities. The rates are not necessarily the cheapest, nor is the rate fixed but it does offer some tax advantages in the US.

3. Private Bank Loans: Less popular than they were in times past because banks now make much more money with credit cards, these loans are generally 5- or 10 year terms. Your local bank will issue them to you in increments up to $20,000 depending on your credit rating and relationship with the bank.

4. Home Loans: Any variety of the many ways to get money from your house. There are the vanilla mortgages and second (or equity lines of credit) and it gets more exotic from there with trust deeds, which are like a second line of credit except they are generally with an investor (not a bank), the rates are high and they are usually in third or greater ownership position on your property.

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