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.

03 July 2008