Probably whichever one has the lower interest rate, assuming you don't intend to PIF right away. They count similarly on credit reports, I think. I don't have a PLOC, but nearly got one to use for a motorcycle purchase, before someone here explained how it works and I decided to get an installment loan instead.
Edit: a "HELOC vs PLOC" thread got combined with a "PLOC vs CC" thread. My answer is re: "PLOC vs CC".
@Anonymous wrote:Hello Everyone!
Can someone explain the benefits and drawbacks of HELOC vs PLOC and why?
What do you use one for vs the other?
Which has a better interest rate? Payback? Credit score needed? Which bank/CU? I have so many questions 😁
1. I don't recommend using HELOC's because I think it's a bad idea to borrow against your home.
2. HELOC's have lower interest rates than PLOC's.
3. I don't recommend that you borrow with PLOC's either. The interest rates are too high.
To answer the question on if it is better to use a credit card or PLOC for the home improvement work, I would go with the previous suggestion to find an 18 month 0% card if you would be able to pay it off in that time.
I agree with @SouthJamaica, borrowing against a home is something I would try to avoid at most every cost.
Is this work that you can save for? Sometimes patience is the best answer.
@DaveInAZ wrote:
@iced wrote:
@DaveInAZ wrote:A HELOC has a much lower interest rate, my Penfed HELOC interest rate is currently 3.75%. BUT a HELOC requires an appraisal of your home's value that will cost you $400-500. But then most HELOCs are good for 15 years, so if you plan to keep your home for some time it works out over the long term. But if you may sell & move in a few years, a PLOC, Personal loan, or even a CC with 15-18 months 0% BT may be the better move.
Would this still be true if the bank giving you the HELOC is the same that holds your mortgage? In such a case, they're already pretty aware of the home value and the equity you hold within it.
Not particularly interested in one myself, but I would be surprised if I asked Chase (my mortgage lender) for a HELOC and they came back asking for additonal information that they already had.
Property values fluctuate with the economy. With the current record low mortgage interest rates home values in most areas are rising. Maybe if you got your mortgage within the past few months, but if you want a home equity loan within a few months of getting a mortgage you should have just gotten a bigger mortgage.
As for those who think it's a bad idea to borrow against your home, it may be a bad idea if you use the money to buy something frivolous or something you really can't afford. But used wisely like home improvements etc. it can be a wise choice. I consider my mortgage & HELOC payment to be like rent, only usually a much better deal. You have to pay something for a place to live, and my mortgage/heloc payment is still much lower than I would pay to rent something in my area, so I'm happy.
IMHO it's not a question of how "wisely" you use the money.
It's a question of risk.
When everything's hunky dory, yes it's lovely to "tap into the equity" of your home. But if one's financial circumstances turn against you, and/or the real estate situation turns against you, it's not great that you leveraged the place that you and your family live.
If you're very wealthy you don't need to borrow for home improvements.
If you're not very wealthy, all it takes is one illness, or accident, or loss of one's job, and the world can turn against you pretty fast.
The risk of foreclosure is not a pretty picture.
