Loan or Remortgage?
In certain borrowing situations you may find that using a credit card makes more sense than applying for a loan. Here is a short guide to help you decide whether your borrowing options will be better met by a credit card or a loan.
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Loans |
Remortgage
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| Pros |
- No risk to your home. An unsecured loan allows you to borrow without needing to provide security to the lender. This means you can borrow without risking your home
- Easy to set up. Loans are easier and cheaper to set up than a remortgage. You may have to pay a small application fee, but you will have your money in a much shorter timescale.
- Better for smaller amounts. If you are only looking to borrow a small amount of money, a loan is a good option.
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- Lower interest rates. A remortgage is one of the cheapest ways to borrow money, as you are offering the lender security in the form of your home. You will also be able to choose from more flexible loan conditions and longer terms than with a regular loan.
- Good for bad credit. If you have a history of bad credit you may find that your loan applications are declined, or that you are only able to borrow at very high interest rates; while a remortgage will offer a cheaper way to borrow money as you are providing the lender with security.
- Streamlined finances. Your finances will be rolled into one with a remortgage, meaning you only have one monthly repayment to deal with rather than juggling multiple.
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| Cons |
- You will be juggling multiple monthly repayments rather than one.
- You will be borrowing money at a higher interest rate with a loan than a remortgage, even with a secured loan. This is because a secured loan is a secondary loan against your home whereas a remortgage is a primary loan, making them more risky for the lender.
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- Can be expensive to set up. You may have to pay application fees, as well as valuation and solicitor’s fees when setting up a new mortgage.
- It also takes longer to set up a remortgage than a loan, which means it will take you longer to get your money.
- You are risking your home with a remortgage, as the loan is secured against your home. If you fail to repay the loan in full you could lose your home.
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| In summary |
If you have a poor credit history you may find that a remortgage offers a cheaper borrowing option than a loan, so speak to an independent advisor for a quote before applying.
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A remortgage must be times right in order to be beneficial. If you are locked into a lock-in period, or there are hefty early repayment charges involved with repaying your mortgage early, you might find it better to wait until you come to the end of your introductory period, or consider a loan instead.
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