Consider the alternatives
Getting a loan of any sort is not always the best option
for people looking to raise some cash. Paying off debt is
an expensive business and eats up part of your income that
may be better employed elsewhere. Here are some other finance
options that may or may not be better for you, depending
on your circumstances.
Use savings
Using your cash savings is often the cheapest way to fund
any spending. The interest you will lose is likely to be
a lot less than those you pay on most loans or other forms
of borrowing. If it is possible, then delaying the spending
while you save up the money can be the most sensible solution.
If you do go down this route, don't consider your overdraft
facility as savings, start depleting accounts that pay the
lowest rate of interest first and leave any money in tax-exempt
schemes until last.
Remortgage
If savings aren't an option, then a competitive remortgage
is likely to offer the best rates for most borrowers, particularly
given the large number of heavily discounted deals that
are available.
Further advance
Getting a further advance on your existing mortgage can
be a lot less hassle than going through the rather longwinded
process of remortgaging and usually means that you will
be able to get your hands on the money more quickly. However,
any further advance on your mortgage is likely to be at
the lender's Standard Variable Rate, which will be lower
than with any form of loan, but higher than the up front
rate charged on a remortgage.
If you opt for a further advance, you will need to check
that the purpose for which you intend to use the money is
considered acceptable by your lender as some of them have
strict rules on the use of the money. This is less likely
to be the case if you have a flexible mortgage, many of
which allow you to draw down additional money on a fairly
regular basis, often for any purpose that you like.
Remember that any additional borrowings will add to your
mortgage debt, so you need to be certain that you can make
the necessary repayments, as your house will be at risk.
Another disadvantage of adding to your mortgage is that
you will more than likely pay the additional debt off over
a longer time period. One of the golden rules of debt is
the quicker you pay it off, the better.
