These days, the rising cost of living does not only affect low-income households. Even people on moderate incomes struggle to make ends meet everything from gas to groceries to more expensive utilities.
The consumer price index, which measures the cost of consumer goods, increased by 7.9% in February. This is the largest increase on record since 1982.
If you are having difficulty paying your bills due to galloping inflation, you may need to borrow money temporarily to keep up. You could display a tab on your credit card and pay it off over time, but if you go that route, you could not only hurt your credit score, but also rack up costly interest.
You can also request a Personal loan, which will generally allow you to borrow at a lower interest rate than a credit card. However, if you own a home, you may have a more cost effective option.
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Is it time to tap into your home equity?
Equity refers to the portion of your home that you fully own, and you can determine how much of it is by taking the market value of your home and subtracting the balance you owe on your mortgage. The owners are currently sitting on a record level of home equity. If you’re in this boat, you might consider taking out a home equity loan.
It’s a common myth that if you take out a home equity loan, you should use that money to improve your home. Like a personal loan, a home loan allows you to borrow money for any purpose. And while there are potential tax benefits to be reaped by taking out a home equity loan for renovation purposes, you absolutely can borrow against the equity in your home to cover regular living expenses.
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The advantage of home equity loans is that they are quite easy to obtain once the equity in your home is there. And they tend to come with lower interest rates, making them affordable.
In fact, you may be able to get a much lower interest rate on a home equity loan than on a personal loan, especially if your credit isn’t great. This is because a home equity loan will use your home as collateral, whereas personal loans are unsecured, meaning they are not tied to any specific asset that your lender can access to be repaid in a flash. ‘eye.
Of course, the downside of home equity loans is that falling behind on yours could put you at risk of losing your home. But if you borrow wisely, a home equity loan could be the perfect solution to get you through these tough financial times.
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When will inflation cool down?
Rampant inflation can be difficult to manage, and the good news is that it won’t last forever. But it is difficult to predict when the cost of living will begin to decline. If you’re struggling right now, it’s worth considering whether borrowing against your home is a viable option.
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