Raid my ISA or get a loan

mccumpherty

Hi there,

I need an additional 20k in order to complete some home improvements and am trying to work out the best way to source it.

I easily have enough in ISAs that I have built up over the years so that would be one option.

The other option I can see is to take a loan out.

I plan on leaving the money in the ISAs for the long term (10+ years).

As such my bet is that I am better off taking a loan as I will make more in the long term by leaving the 20k in the ISAs than it would cost for a loan.

Initial research indicates I could get the 20k at 2.9% which would cost around £1500.

Historically my ISAs have achieved much better than 2.9% over say, a 5 year period.

I should add that the ISAs were taken out directly with a fund supermarket and has had much better returns than I would have got with a bank ISA.

What do people think?

AM

soulsaver

I think you've answered your own question but if you go for the loan and there is a crash you'll regret it. So who has a crystal ball?

However, should you choose to use your ISA, I'd liquidate the funds you need & transfer it to a flexible ISA before withdrawing it. You'll then have the rest of this tax year to put back in what you can.

BoGoF

Also, the representative 2.9% APR need only be given to 51% of applicants so there is no guarantee you will get that rate.

Craig1981

agree with the above

what i would add is that the 2.9% loan rate advertised is offered to merely 51% of applicants only.

your individual APR would come down to individual circumstances. I would suggest doing a quotation only on two different sites to see the type of APR you may get.
i do not know much on ISA accounts, however if the APR is lower than interest accrued anywhere on savings, then loan is the better option

mccumpherty

Many thanks for responding. It seems clear to me now that a loan is the best way forward.

The key part is that I'll be keeping the money in the ISA for a long time to come - in fact I've been building them up over the last 18 years. In that time there have been some fallow years as well as the crash of 2008, but over the long term it's a case of 3 steps forward and 1 back.

So all in all, it seems more than likely that whatever rate I do get for the loan, the cost of that will be more than covered by not raiding the ISA piggy bank.

Thanks again for taking the time to read my question and respond !

TriggerHappy

Hiya,

Yup, if you're not having debt issues (which you don't appear to be) then go with the loan.

The other good thing about that is that if you can afford to, you can repay it early whereas you can't just chuck £20k back into your ISA. Also, withdrawing from your ISA would impact your interest rates probably.

Good luck!