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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Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Heartland Bank and Heartland Planning Associates are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Heartland Planning Associates, and may also be employees of Heartland Bank. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Heartland Bank and Heartland Planning Associates. Securities and insurance offered through LPL or its affiliates are:

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