Whether you need the money to make any additions or changes to your home, or you need money to pay for an added expense that popped up suddenly, you might start thinking of ways to get some money stat.
Most people immediately think of one of two options: remortgaging or getting a loan.
Here are some factors to help you decide between these two options.
Arrangement fees
The first factor you need to consider is the fees you will pay to get extra cash.
If you decide to remortgage your home, you will have to pay arrangement fees more often than not.
On the other hand, many lenders do not ask for a fee when you are applying for a personal loan.
In fact, according to Money Trumpet, an introducer receives his fees after accepting your loan application, which, luckily, does not affect you or your dealings with the lender of your choice.
This means that you do not have to worry about additional fees when applying for a loan, unlike when you are applying to have your house remortgaged.
More cash
When you think of either getting a loan or remortgage, you are most likely looking for the process that will result in more money.
Remortgaging your home will give you more immediate cash than taking a loan would.
Most likely, loans have a limit of 25000 euros, while remortgaging depends on your home’s value and can, thus, secure up to 50000 euros.
In other words, you can get up to double the money you’d get from a loan if you decide to remortgage.
Length of payment plan
Loans usually have shorter payment plans than remortgaging does.
This is both an advantage and a disadvantage.
You can be free of your debt within a short period; however, you will have to pay a larger sum of money to pay the debts incurred from a loan within the time allotted.
On the other hand, if you choose to remortgage your home, you will have a longer payment plan that can span many years.
This is great because monthly payments will not be too much; however, you will remain in debt for many years to come.
The risk to your property/ credit score
When you remortgage your home, you are putting your home up as collateral if you do not stick to the specified payment plan. (Investopedia)
This means that you are putting your property at risk of repossession by the bank or entity involved in remortgaging your home.
When you get a loan, this does not affect your property but has an exponential risk to your credit score.
Getting multiple loans or loans that you struggle to pay back will ruin your credit score, making it harder to get loans in the future, and you will also take many years to get over the damage.
Consolidation of debts
When you remortgage your home, you can consolidate all of your separate debt into one that you can pay off in monthly increments.
This makes tracking what you need to pay easier since you will have only one payment a month, which covers all of your debts.
This is not a popular option with loans, especially if the sum of your debts is more than the limit of the loans available.
Interest
Interest is an important factor because you never want to spend large sums of money on paying off debts.
When you remortgage your home, you will have a long period to pay off the borrowed money; however, a longer time means you will pay a lot in interest.
When you get a loan, one of the advantages, as mentioned above, is the shorter period and a large number of lenders out there to choose from.
You can get a loan with a minimal interest rate that you can easily cover.
After considering these different factors, you will have a much easier time choosing the right option for your needs.
Just keep in mind that any decision you take now will affect your future since you will be spending a time repaying a loan or your new mortgage.