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Need a Cash Injection? Here Are 3 Creative Loan Sources to Consider 

 January 26, 2023

By  Kyrie Mattos

In any market condition, every dollar we earn matters, but in an inflationary period, that’s amplified. As the buying power of our current dollars gets eroded, it becomes more important to find new ways to earn money. 

Very often, to do this, we need capital, but that can be very hard to do when typical sources of funds dry up because of the economy. The good news is there are other more creative ways to raise the capital you need to invest or create new streams of income. Here are a few to consider. 

Borrowing Money Off a Hard Asset 

Many people seek capital when the money they need is right under their noses. If you own a hard asset like a home, there are various ways you can leverage your equity to access some much-needed cash. If you think about it, in many ways, the portion of your home that you own is a bit like a secret savings account, so why not tap into that for a cash injection? 

There are many ways you can do this, including; 

  1. A reverse mortgage is a financial product that allows homeowners to borrow money against the equity in their home without having to sell it or make monthly payments. Instead, the loan is repaid when the borrower dies, sells the home, or moves out permanently. According to All Reverse Mortgage Inc, experts in reverse mortgages in California, “to use a reverse mortgage to raise capital, the homeowner would first need to meet the age and home ownership requirements and then apply for the loan through a lender that offers reverse mortgages. The homeowner would then receive the loan proceeds, which can be used for any purpose, such as home repairs, medical expenses, or investment opportunities.” 
  2. A home equity loan is a popular option for homeowners looking to raise money for various expenses. It allows them to borrow against the equity they have built up in their property, and the loan is secured by the borrower’s home. The interest rate on a home equity loan is usually lower than that of a personal loan or credit card, making it an attractive option for many homeowners. However, it is important to remember that a home equity loan is secured by the borrower’s home, meaning that the lender can foreclose on the property if the borrower defaults on the loan. Thus it’s important to carefully evaluate your financial situation and consider the potential risks before taking out a home equity loan.
  3. House hacking is a strategy for raising money through real estate investment. It involves purchasing a property, such as a multi-unit building, and living in one unit while renting out the others. The rental income can help offset the mortgage and other expenses associated with the property, allowing the homeowner to live in the property for little or no cost. Additionally, the homeowner can potentially earn a profit from the rental income and from the appreciation of the property over time. However, it is important to note that house hacking is not without risk, as rental income can be unpredictable, and the property can depreciate in value. It’s also important to consider the responsibilities and regulations that come with being a landlord.

Insurance Policies 

A whole life insurance policy is a type of permanent life insurance that provides coverage for the entirety of the policyholder’s life. One of the benefits of a whole life insurance policy is the ability to borrow money against the cash value of the policy. Policyholders can typically borrow up to the cash value of the policy minus any outstanding loans or unpaid premiums. Many people use these policies for a cash injection, to buy vehicles, fund renovations, and many other things that require quite a bit of money. The borrowed amount is then repaid to the policyholder’s death benefit, which reduces the death benefit available to beneficiaries. It is important to note that if the policyholder is unable to repay the loan, interest and any unpaid loan balance will be deducted from the death benefit. Additionally, if the policy is canceled or lapses, the outstanding loan balance may become due immediately. Borrowing money through a whole life insurance policy can be a useful option if you’re in need of cash, but it is important to understand the potential impact on the death benefit and the terms of the loan before deciding. Not all policies are the same, so you have to make sure you’re going with the one that unlocks the advantages. Do your homework and make sure you’re aware of all the terms and conditions, so it’s a move that leaves you better off in the long run. 

Borrowing Money Against a Crypto Wallet 

Borrowing money against your crypto wallet is a way to access cash while still holding onto your digital assets. This can be done by finding a lender that offers loans against crypto assets and using your crypto holdings as collateral for the loan. Popular platforms that offer crypto-backed loans include Nexo, BlockFi, and Celsius. After verifying your account, you can apply for a loan with the lender, with the amount you can borrow typically based on the value of your crypto assets and the loan-to-value ratio set by the lender. You will then receive the cash in your account and make regular payments, including interest. Be aware that the value of your crypto assets may fluctuate, which can affect the amount you need to repay, so it’s important to monitor the value of your assets and make sure you have enough cash on hand to repay the loan if the value of your assets decreases.

Don’t let a perceived lack of capital stop you from going after new streams of income or investment opportunities. There are many ways you can use what’s already working in your favor to gain even bigger advantages. This will allow you to not just stay financially stable through a difficult economic period but to actually grow your wealth in a meaningful way going forward. 

Kyrie Mattos


BayCitizen.org

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