If you’re a homeowner and you’re in need of a large lump sum of credit, you largely have two options – remortgage your property or take out a personal loan. There are advantages and disadvantages to both options. So, before making a decision on what’s right for you, it helps to know the difference between the two.
Here, we’ll look at how remortgaging differs from getting a personal loan, and what factors you should consider when deciding which of these options is most suited to your needs.
How remortgaging and personal loans work
The remortgaging and personal loan processes work in totally different ways. With remortgaging for example, you’ll typically apply for a new mortgage deal for a slightly larger amount than your existing mortgage. You’ll borrow slightly more than you need in order to make up for the lump sum you want. The entire process usually takes anything from 4-6 weeks, which makes more suitable if you’re not in a rush for funds.
Personal loans on the other hand, require you to apply only for the money you’re looking to borrow. You can take out a personal loan secured against your home, for a total of up to £100,000 depending upon the lender. The process is a lot quicker than remortgaging, with all personal loans usually deposited within 3-5 days. Many lenders even offer instant loans which pay out the same day, so there’s no need to hang about if you’re in a hurry. You can use a credit broker such as Ocean Finance, to help you find the best personal loan to suit your circumstances.
Deciding which option is right for you
So, now you understand a little more about each option, how can you decide which is right for you? Well, it helps to consider the following:
- How quickly do you need the money?
- How long do you want to pay it back for?
- What is your credit rating like?
If you need the money quickly, a personal loan is going to be the much better option. Similarly, if you don’t want to be paying the loan back for a long period of time, a personal loan could be right for you. However, if you have a bad credit score, you could find it difficult to get an affordable personal loan. In this instance remortgaging could be the cheapest option.
This is because a bad credit score means that you have a less than spotless history of repaying your debts. When lenders see this, they are less likely to give you a loan as they want to be sure that they’ll get back the money they lend you.
By weighing up all the various pros and cons, you’ll be able to see which option best fits your particular needs. Both remortgaging and getting a personal loan can be great ways to secure the lump sum you need, but they also have a lot of potential downsides that you really need to consider before making your decision.