Often when people have a mortgage and they want some more money they choose to increase their mortgage rather than taking out a personal loan. This can be a good idea, but sometimes a personal loan can better or possibly even a different sort of loan altogether.
If you just compare interest rates when you are looking to borrow money then you will be likely to see that the mortgage rates are lower. This would then make you think that it would be cheaper to borrow extra money on the mortgage if you want some. However, this may not be the case.
Most interest rates include fees and charges as well, spread out in each monthly repayment and this means that if a loan is a very long term loan, these will be lower and a short term will be higher. This is why the interest rate will be higher on a short term loan. There may also be fees and charges added in on top of interest in some cases and this needs to be accounted for as well.
The very best way to see what will be the cheapest way to borrow is to calculate the total cost of the loan. So if you are thinking of borrowing some extra on your mortgage, calculate how much interest you will pay on that each year and how many years are left to find out the actual cost of the loan. If you want to compare with a personal loan calculate the interest in the same way and add on the administration fees and any other charges. Do this for all possible options and then you will be able to compare how much each will cost.
Of course, cost may not be the only factor. You may not be able to afford the repayments if you take out a loan for a short period of time. You may find it easier to add it onto your mortgage and then make smaller payments over a longer period of time.
Time could also be a factor as you may need the money quickly. It could be easier to ask to add on some money to your mortgage than to organise a new loan. However, it may be that a loan is quicker, it will depend on the lender and what checks they want to do etc. It is good not to rush if you can, as you want to take the time to research the best possible loan for you, but if you have no choice then you may just need to pick the quickest.
You may also be limited by how much you want to borrow. If you only need a small amount then you may not be able to get it form a mortgage or loan but you may have to use a credit card, overdraft or short term loan. This is a more expensive way to borrow with regards to the interest rate but as long as it is paid back quickly it can be cheaper than spreading the loan over a long term as explained before.
You may feel that you want to borrow form a place that you know as well even if they are a bit dearer. You may want someone you can trust with a good reputation. You may feel that customer service is important and you want to find out about that first and choose a lender which has good customer service. You may also decide that you want someone that has good reviews and have a look at those as well.
It can be a difficult choice but it is worth doing a lot of research first if you have the time. The cost of the loan is important and make sure that you calculate the full cost including the fees and charges so that you know exactly how much it will be. You also need to think about the specific lender and if there are any features that you will be looking for in them that will be important to you. If you are unsure or not confident in doing the calculations then it is wise to get financial help. If you are borrowing a lot of money then it could be wise to see a financial advisor as they should be able to help you find a solution that will save you more money than the fee that they charge. There may also be free help available from a money service which could help you. You could also ask friends and family for help as they will be able to let you know what they have done in this situation and what they think you should do. Getting help and reading things online should help you to make a better decision. This will take time but it is worth doing as you could end up saving a significant amount of money.