<p>My nieghbor just told me he co-signed a signature loan for his son, through Sallie May. This loan will pay for the last two years of his son's education. My nieghbor claims these loans have lower interest rates than the home equity type because the students name is on the note. Unlike home equity loans the payments on these "signature loans" do not have to made until the student graduates. He is picking up the entire tab for his son anyway, but saw no reason not to take advantage of a lower rate and deferred payments. This seems like a better move than a home equity loan.. Is he wrong?</p>
<p>With a signature loan, you may not have the tax deductions that may be available to you through using a home equity loan. But on the other hand, if you can't pay the loan off, you won't lose your house.</p>
<p>Also, how much is he borrowing? I suspect we could borrow a lot more against our home equity than on a signature. We've lived in this house for 15 years and didn't refinance, so we have a lot of equity, even with the real estate downturn.</p>
<p>You really would have to go to your bank and check both out. I have a home equity at 4.45%. I doubt the signature is that low.</p>
<p>When we say home equity, are we talking about a HELOC? I think those are lower in interest rate than an actual home equity loan.</p>
<p>Yes HELOC. They are lower but as in my post above they are generally loans that are "interest only" as far as payments go.</p>
<p>Yeah my neighbor means a home equity line of credit as compared to a signature loan for.. I think he said 60k, which he can defer until his S graduates. I mulling over the choices I'll soon have to make.</p>
<p>Hmmmm... with a HELOC if you're only obligated to pay the interest, (until the student graduates) AND you get the tax deduction to boot, my thinking is the HELOC might be the better deal.</p>
<p>my HELOC has nothing to do with college funding, my understanding is that most HELOCs are interest only. That is the risk with the HELOC, you have to be disciplined enough to pay more than the interest.</p>
<p>One advantage of a signature loan may be that the interest rate is set and not variable. Also, maybe the loan can be bundled with others at some time in the future?</p>
<p>HELOCs interest rates are variable, are they not? You could really get burned with a variable interest rate loan.</p>