Borrowing for a Personal Purpose
A personal purpose is any private purpose not related to a home, business, or purchasing an automobile. Examples of personal purposes are travel, medical co-pays, college tuition and automobile repairs. A personal purpose generally doesn’t have to be disclosed or even decided upon at the time you apply for or extend credit. Whereas, a loan secured by the asset being financed will already have its purpose disclosed.
Why Borrow at All?
- You need liquid funds (i.e., avoid the forced liquidation of assets, potentially at unacceptable costs)
- Enables you to remain diversified in your investments, reducing the risk that stems from overconcentration in a single asset or asset class
- Probability of earning a higher return on investment (ROI) elsewhere
- Guaranteed access to funds in an emergency or for unplanned expenses
- To consolidate high-interest debt (i.e., borrowing to reduce the total cost of borrowing)
- Potential tax advantages, such as a home equity line interest deduction
Evaluating Your Credit Options
The terms on which credit is issued vary greatly by type of credit and credit product. Also, the type of credit and how it’d used can have significant tax ramifications. Finally, the amounts borrowed and repayment schedules selected can impact the availability of credit later on. Some things to think about when choosing the type of credit you need are:
- Standard (“off the shelf”) and custom
- Short, medium, and long term
- Secured and unsecured
- Fixed and adjustable rates
- Non-revolving and revolving (i.e., fixed/installment and flexible repayment schedules)
- No interest and waived interest
- Ancillary benefits (e.g., convenience, rewards, consumer protections, special services)
- Eligibility requirements
Your private banker can help you evaluate your options in light of your immediate and long-range objectives.
What are Your Borrowing Options?
- Credit cards
- Personal loans and lines of credit
- Home equity lines of credit
- Investment-secured loans and lines of credit
- Cash value from an insurance policy
- Retirement plan (think of this as your “last resort”)
Things to Look for in a Personal-Purpose Lender
As you can tell, there are an overwhelming number of options when choosing the credit option that is right for you, but choosing a lender shouldn’t be that way. Choose a lender that offers these key attributes:
- Integrity and stability
- A commitment to building and maintaining a long-term, multi- dimensional relationship with you—and the ability to deliver on that commitment
- An experienced workforce with specialized knowledge/expertise for handling complex needs
- A well-stocked tool chest (i.e., the products/services that are used to create a personalized solution)
- A full complement of wealth management capabilities— wealth planning, investments, insurance, private banking and personal trust services
- Comparatively high credit-card spending and withdrawal limits
- Tailored pricing on loans and lines of credit
- Customized loan underwriting
- Jumbo and super-jumbo loan amounts
- Financing for “non-conforming” income situations (i.e., beyond W-2)
- Low or no prepayment penalties depending on the type of loan
A few financial insights for your life
This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.
Your investments in securities, annuities and insurance are not insured by the FDIC or any other federal government agency and may lose value. They are not a deposit or other obligation of, or guaranteed by any bank or bank affiliate and are subject to investment risks, including possible loss of the principal amount invested. Past performance does not guarantee future results.
First Citizens Wealth Management is a registered trademark of First Citizens BancShares, Inc. First Citizens Wealth Management products and services are offered by First-Citizens Bank & Trust Company, Member FDIC; First Citizens Investor Services, Inc., Member FINRA and SIPC, an SEC-registered broker-dealer and investment advisor; and First Citizens Asset Management, Inc., an SEC-registered investment advisor.
Brokerage and investment advisory services are offered through First Citizens Investor Services, Inc., Member FINRA and SIPC. First Citizens Asset Management, Inc. provides investment advisory services.
Bank deposit products are offered by First Citizens Bank, Member FDIC.