Your quick guide to your best short-term financing options
Short-term financing – credit or loans that are designed to be paid off in a short period of time – can be a useful financial tool in a variety of different situations, such as: Bridge financing If you’re planning on moving and have found a new home before selling your existing one, you may need […]
Short-term financing – credit or loans that are designed to be paid off in a short period of time – can be a useful financial tool in a variety of different situations, such as:
- Bridge financing
If you’re planning on moving and have found a new home before selling your existing one, you may need a short-term loan to make a down payment on the new place.
- Seizing an investment opportunity
If an opportunity arises, a quick injection of cash will enable you to take advantage of it.
- Consolidating debt
If you have multiple different loans, you can consolidate them into one single loan if you find one with a lower interest rate.
- Covering unexpected expenses
Accessing some short-term cash will let you cover unplanned expenses, such as paying off medical bills or helping out an adult child during a period of unemployment.
But what are the different types of short-term financing options? And how do you know which are right for your situation?
Short-term financing options
Home Equity Line of Credit (HELOC)
A HELOC is a revolving line of credit secured against your home, typically allowing you to borrow up to 80% of your home’s value.
- Interest rates are typically low.
- You have flexibility over when you pay it off.
- You can access portions of the approved sum at different times.
- You therefore only pay off and pay interest on the amount you access.
- Retirees can find it hard to qualify, particularly if they don’t have a regular income or a strong credit score.
Private Loan or Mortgage
These are loans which typically have a period of one year.
- They’re usually fairly easy to qualify for if your home has enough equity.
- Set-up fees and interest rates are typically high.
Short-Term Installment Loan
These are loans in which set amounts are repaid at regular intervals for the term of the loan.
- You pay it off in installments rather than all at once.
- Unlike a credit card or line of credit, you can’t access portions of the approved sum at different times.
- They can include hidden prepayment fees.
A payday loan is a short-term loan characterized by very high interest.
- Usually easy to qualify for.
- You can often access them even if you have a bad credit score.
- Interest rates are extremely high – often exceeding 300% over a year.
These are short-term mortgages, typically six months, with a fixed interest rate.
- They can be switched to a long-term mortgage if you choose.
- They usually have a higher interest rate than adjustable rate loans.
This is when the collateral of one loan, such as a car, is used to secure another loan you have with the same lender.
- Interest rates can be lower.
- The lender may keep you from selling the asset being used as collateral, even if you have paid it off.
A New Short-Term Financing Option
CHIP Open is a new, short-term financing product offered by HomeEquity Bank. It’s a reverse mortgage which allows you to access up to 55% of the value of your home in tax-free cash. However, unlike a traditional reverse mortgage, there are no prepayment fees, meaning you can pay off the full amount whenever you like.
- Easier to qualify for than other short-term products since its not based on income or credit rating.
- No monthly repayments.
- Interest rate and fees are highly competitive in the short-term lending space.
- If you decide you need a longer-term solution, you can switch to the CHIP Reverse Mortgage at a lower interest rate.
- Only available for Canadians 55+.
- You must own your home.
- Interest rates are higher than the regular CHIP Reverse Mortgage, allowing us to completely waive any prepayment penalties.
Contact me if you’d like to discuss further.
Mortgage Agent (Lic #M19002844)
DLC Parato Mortgage Group
Independently Owned & Operated
Tel. (289) 489-2152
Original Post: https://dominionlending.ca/sponsored/your-quick-guide-to-your-best-short-term-financing-options