Loan or Additional Borrowing against my home...Help!

Fidget21

Hi there...

I'm in need of a bit of advice. I need to borrow about £12,000 and am unsure whether it is best to do so by taking out a personal loan or by additional borrowing on my mortgage.

I'm looking to repay over 4 years, if I borrow the additional on my mortgage I will be paying less per month and repaying less overall...but I'm a bit panicked by the whole fact of it being secured against my house.

On the other hand, if I borrow through a personal loan I will be repaying at a much higher rate of interest and therefore repaying quite a bit more and the repayments will stretch me to the top end of my budget.

I would just appreciate anybody's advice on which is the best way to borrow.

Thanks in advance.

CLAPTON

why do you need 12k..?

being stretched to repay over 4 years seems unwise... say stufff happens (cg boiler packs up, car needs replacement etc) how would you cope.

Fidget21

The money is for a car. We need a good car for my husband's commute, which he also needs to use occasionally for work. We want something we can keep for 5-6 years but will still have a reasonable residual value to trade in. Also, the cars we are looking at fall in to the 119g/km CO2, therefore are only £35 per year car tax.

I am (thankfully these days) pretty much debt free other than this £12k I want to borrow (another source of panic I'm sure, as it is a long time since I've owed anybody as much as £12k!) and in my budget plan that I have made I have also scheduled money to go into savings to cover me for life's little extras, holidays etc...

dannynixon

Do you really need a 12k car?

Could you not but a 3 or 4 year old car for 5k?

Geenie

Just a thought as not sure what your interest would be on a loan or increased mortgage, and I am not sure what is happening elsewhere around the country with dealers. But up until a few weeks ago, our local Vauxhall were advertising interest free for 4/5 years on some models and about 3.9% on others. May be cheaper to go directly with the dealers then getting a loan etc at a higher rate, as many may be getting desperate to shift stock and have good promotions at present.

mrcow

We bought a £13k car last year on a 0% for purchases credit card. When the deal ended, we switched to a 0% on blance transfers and paid a 2% balance transfer fee. Wewill repeat this once the deal runs out in November although it will mostly be paid off by then.

Advantages of this are:

1. Flexibility - we pay quite a lot off each month, but have the flexibilty to change repayments (as long as theminimum balance is paid)
2. Affordability - it works out less than 4% apr which is better than any loan deal I could get
3. We got rewards points for the original purchase (MBNA Plat Rewards card)and traded them in for Boots vouchers
4. Because we were a "cash" buyer, we could haggle a good deal

Disadvatages:
1. You need a good credit rating & salary to ensure that you can get a high enough credit limit
2. You need some financial discipline to make sure that you are on top of your cc deals
3. You must not spend any money of the cards being used- they are for the sole purpose of the car purchase
4. We had to pay a credit card fee to the dealer in thefirst place (can't remember exactly how much but it still made the overall deal much cheaper)

Fidget21

Thanks guys...

Still considering the options, one of which being not buying a car yet and saving some more money. But I appreciate your input.

Danny, I think you have hit the nail on the head with your post...I don't need the new car as the one we have got is okay, and buying something just because it was something I wanted rather than needed was how I got into debt the first time!! Oh well, it just goes to show you're never completely cured just that the beast is held at bay!!

dannynixon

Glad to be of help