Comparing Ways to Borrow - Merrimack County Savings Bank Test

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Where Will the Income Come From?

Comparing Ways to Borrow

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	Interest Rates	Fees	Availability	Tax-Deductible Interest	Risk Factors
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.	Fairly easy	Generally yes	Risk of losing home if in default
Home Equity	Typically lower than most other loans	Low	Easy	Generally, If used to "buy, build, or substantially improve" the home that secures the loan	Risk of losing home if in default
401(k) Plan (If Available)	Fairly low	Little, if any	Easy	No	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.
Life Insurance	May be low	Depends on insurance company	Easy if you have sufficient cash value in your policy	No	If loan is not repaid, proceeds at death will be reduced and interest on unpaid amount may continue to compound.
Business Loan	Moderate	Depends on purpose of loan	Difficult	Yes	Business assets may be at risk
Secured Personal Loan	High	Little	Difficult	No, unless money is used to purchase investments	Collateral at risk
Unsecured Personal Loan (Credit Cards)	Highest	Little	Moderate	No	Temptation to accumulate expensive debt quickly
Relatives or Friends	Depends	None	Difficult to find a willing lender	No	Jeopardize relationships

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