What Using a Home Loan as Finance Could Cost YouMar 18, 2016 Blog RainFin , SME
Life isn’t cheap. Whether you’re trying to pursue further education, renovating your house, starting a family, or trying to grow your business – you’re likely to need access to finance at some point or another.
The old proverb goes that a bird in the hand is worth two in the bush; but we’re willing to bet that the cost of day-to-day living wasn’t quite as high when that phrase was coined! It would be wonderful to embark on every personal and business project with a large quantity of personal capital at hand – but unfortunately this isn’t a position many are privileged enough to find themselves in.
So, if you need to borrow money, it’s natural to go to a place that you know and trust.
Credit cards can be a relatively easy and straightforward way of accessing smaller amounts of money on credit. The drawbacks, however, are relatively high interest rates and the ongoing access to credit – amongst other reasons this is why you might decide to take a loan out instead.
One way that many individuals gain access to finance is to re-mortgage their homes. Turning to the banks when you need financing help makes sense. They have a full financial history of you, interest rates are usually low and your borrowed amount can be easily added to. But while this can be a positive transaction – it could also end up costing you more in the
Longer than average loan terms
Mortgages provide finance at low monthly repayment rates because the loan term is usually for a considerable period (most mortgages are for between 5 and 30 years).
While this is convenient for purchasing property (as it occupies the space in your wallet usually taken up by rent) for other purchases it is less appropriate. If you are using a home loan to fund a relatively inexpensive amount – the fact that you are repaying this amount over 20 years (instead of three) could mean that despite a low interest rate, you end up paying a lot more. Plus, home loans can come with additional fees.
Early Repayment Fees
Early repayment fees are a charge paid if you take the action to repay your loan in full ahead of schedule. Both mortgage providers and some short-medium term loan providers charge these.
If you want to settle up your accounts you may be charged an excess of thousands of Rand – something that could erase the benefit of paying your loan off early.
It’s important that when you’re considering financial options you do your research. Home loans can be a great way of securing finance in certain situations; but it depends on the amount you want to borrow, the terms of your loan and the length of time your loan is for.
If you need access to short-term finance between 10,000 and 750,000 Rand, for terms of 12, 24, 36, or 48 months; why not consider joining the RainFin community? We facilitate loans between trustworthy lenders and individuals and businesses through our credit marketplace. With fixed monthly repayments, competitive interest rates and no early repayment fees, we could be the solution to your financial needs.