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Where is the best place to get a loan?


VaKim
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Any financial gurus here? We are having an addition put on our house and will need to get a loan to pay for part of it. Understand that we live in a tiny old house valued at around 30 thousand dollars (at least, that is what we pay taxes on). It is paid for. We do have excellent credit and only owe a bit on one car as far as debt.

 

We will be needing to get a loan for about 10 thousand. What kind of loan would be best, and where should we get it? Would our local bank where we have our accounts be best? Or is there an online bank that would be better? We have never had to get any kind of loan before other than car loans. Thanks for any advice in advance!

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I concur with the credit union.  A home equity loan or line of credit might be best if the home is completely paid for. A home equity loan would probably have a fixed interest rate and a fixed repayment plan. A home equity line of credit would likely have a floating interest rate (meaning it can change) and varying repayment plan with the remaining loan needing to be repaid at the end. The rates would likely be better for a secured loan (the security being the home) compared to an unsecured loan (based on your income).

 

Not financial advice, but my personal preference would be a home equity loan as I'd prefer the fixed rate and repayment plan. I am wary of floating rate financing being used for home loans.

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For that small of an amount, a personal loan may make more sense than the hassle and expense of a mortgage of whatever type.  Even if you have $200k in equity, they'll still charge you an appraisal and costs totaling a thousand or so, the better interest rate will take years to pay off those extra costs. Your existing bank would be the first place to ask for one, then a local credit union.  Or a credit card if you're planning to pay it off quickly.  

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If you pay taxes on 30k in home value, it's real value is likely much more. Maybe up to 2-3x, so probably worth 40-90k. At least, that's been my experience with tax rates on residential real estate. 

 

I'd start with the bank you have a relationship with. Stop by or call, and tell them what you need and ask what they can offer you. 

 

They'll probably be able to get you a good loan at a good rate. 

 

I'd suggest asking about a HELOC (Home Equity Line of Credit.) These usually have 0 fees, because the bank pays for them, even the appraisal. You can usually get a HELOC for up to 70-80% of the total home value. 

 

Tell them you don't know what the house is worth, but you'd like a HELOC for some reasonable amount -- round UP -- because they PREFER bigger loans, because they make more off them. So, maybe tell them you're thinking a HELOC for 25k. 

 

Then, go ahead and TAKE as big a HELOC as you can get. They're a great, cheap source of credit. You're a grown up, you need some emergency credit . . . for emergencies!

 

You can pay the HELOC as fast or as slow as you want, so just figure out what rate you want to pay it back, and do that. 

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Shop it around like any other product you buy. But, be careful. Every time you allow someone to look at your credit report, your credit score goes down. So get rates without allowing someone access first. Those online companies that purport to shop your loan may give 5 or 6 companies your social security number so they can access your credit report.

Edited by Minniewannabe
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Thanks everybody! Lots of info here.

Well, DH and I went by our local bank this morning. Of all things, they had one girl there and she was not trained to handle loans yet. She asked if we could come back Tuesday, when the other lady would be there. We explained that DH works out of town and can only come in on Saturdays so we would probably have to go elsewhere. So she called her boss and found out that she could get some of the info today, then the other lady will call me Tuesday to get the rest. Then, if we choose to get a loan there, they can do the paperwork and DH can just go in and sign it Saturday. Aggravating though, because this girl didn't know anything at all. She didn't even know the difference between a secured and unsecured loan. So basically, I still don't know anything about what we will be able to get, but I did make it clear we would go elsewhere if it wasn't satisfactory. 

 

That HELOC thing looks interesting, but I still don't quite understand how it works. Plus it looks like it would be more complicated and take longer to get. 

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Thanks everybody! Lots of info here.

Well, DH and I went by our local bank this morning. Of all things, they had one girl there and she was not trained to handle loans yet. She asked if we could come back Tuesday, when the other lady would be there. We explained that DH works out of town and can only come in on Saturdays so we would probably have to go elsewhere. So she called her boss and found out that she could get some of the info today, then the other lady will call me Tuesday to get the rest. Then, if we choose to get a loan there, they can do the paperwork and DH can just go in and sign it Saturday. Aggravating though, because this girl didn't know anything at all. She didn't even know the difference between a secured and unsecured loan. So basically, I still don't know anything about what we will be able to get, but I did make it clear we would go elsewhere if it wasn't satisfactory. 

 

That HELOC thing looks interesting, but I still don't quite understand how it works. Plus it looks like it would be more complicated and take longer to get. 

 

We did our last 2 loans all on-line (with a credit union).  Only thing we had to do was go there to sign something. 

 

Stinks they were clueless!

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