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2 smart ways to borrow money this summer (and 2 to avoid)

There are several ways to borrow money, but some are more costly than others.  Getty Images/iStockphoto

Do you anticipate a need to borrow money this summer? Maybe you need funding to cope with new summertime expenses or maybe you're looking for financing for another reason. With inflation stubborn and interest rates high, you may be in need of some extra funding right now. No matter why you need to borrow money, however, you have several options available. 

But, the option you choose will play a role in how much time you spend in debt, how much money you pay for that debt on a monthly basis and how much money it costs you over time. After all, some borrowing options will come with better interest rates, fees and terms than others. So, it's important to choose wisely. 

Compare your home equity borrowing options today.  

2 smart ways to borrow money this summer (and 2 to avoid)

If you're interested in borrowing money this summer, it's important to look for borrowing options that offer low-cost access to the funding you need. 

2 smart ways to borrow money this summer

Some of the smartest options for borrowing money are often attached to your home equity. These options use your home as security for the money you borrow, resulting in a lower overall cost of borrowing. Two of these options include: 

Home equity loans

Home equity loans are typically fixed rate loans that are secured by the equity in your home. These loans are usually funded in one lump sum and they offer predictable payments since they come with fixed interest rates. 

And, the interest rates on home equity loans are impressive compared to other borrowing options. At the moment, the average interest rate on a 10-year home equity loan is just 8.77% while the average interest rate on a 15-year home equity loan is 8.75%. That's a far cry from the double-digit interest rates you may have experienced with other borrowing options

With such competitive interest rates and predictable payments, a home equity loan could be a compelling way to get your hands on the funding you need this summer. 

Find out how affordable a home equity loan can be now.


Home equity lines of credit (HELOCs) are similar to home equity loans, but they come with a bit more flexibility - and they require you to be more flexible. HELOCs usually start with a draw period that generally lasts from five to 10 years. While the line of credit is in this draw period, you'll be able to tap into your equity - at least up to your HELOC's credit line. You'll also make interest-only payments. That gives you flexibility in terms of how much you borrow and how much you pay for the first several years. 

When the draw period is over, your HELOC will enter the repayment period. During this period, you'll typically make monthly payments toward your balance and interest. Moreover, you'll be required to be flexible as HELOCs come with variable interest rates. So, your payment may change alongside the overall interest rate environment. 

Nonetheless, if you can ebb and flow with changing payments, a HELOC may be a compelling way to meet your summertime financial needs. That's especially true when considering the average interest rate on a HELOC is just 9.17%. Not to mention, if interest rates fall ahead, your HELOC rate could fall as well. 

2 borrowing options to avoid this summer

If you need funding this summer, there are two ways to get it that you should try to avoid.

Personal loans

Personal loans are a type of installment loan. These loans can give you the funding you need and you'll make monthly payments toward the loan to pay it off. But, these loans tend to come with higher interest rates than you could get if you borrowed against your home equity instead. In fact, according to Bankrate, the average personal loan interest rate is 12.21%. And, if you don't have excellent credit, your rate could be significantly higher.   

Credit cards

You should avoid credit cards this summer, too. According to Bankrate, the average credit card interest rate is 20.68%. That's more than the average interest rates on home equity loans and HELOCs, combined. 

"Credit card debt is expensive primarily due to high interest rates, often exceeding 20%, which accumulate quickly if the balance is not paid in full each month," explains Justin Stivers, financial advisor at the financial planning firm, Stivers Wealth Management. "Additionally, credit card companies may charge fees for late payments, balance transfers and cash advances, further increasing the cost."

And that cost can add up. In fact, if you only make minimum payments, it can take decades to pay off credit card debt and cost tens of thousands of dollars over that time, depending on the size of your balance and how your payments are calculated. 

Save on borrowing costs with a home equity product now.

The bottom line

There are multiple ways to borrow the money you need this summer. But how you borrow money is an important consideration. Consider taking out a home equity loan or opening a HELOC to keep your borrowing costs low and your payments manageable. And, avoid personal loans and credit cards if at all possible, as these borrowing options typically come with high interest and fees. 

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