Are you in need of extra cash? Who isn't?
But if you're thinking of redrawing against your mortgage to buy those extra items like a holiday, car or wedding — think again.
John Symond from Aussie Home Loans
warns us about a common mistake people make when searching for a cash boost.
"The worst thing you can do on your mortgage is to increase your loan for what I call bad debt," he says.
"Instinctively people think their home loan — [which] might be around 6 per cent — is so much cheaper than taking a personal loan at say 13 or 14 or 15 percent But the opposite is the case."
John calculates the amounts payable on a $25,000 personal loan over five years, in comparison to a putting it on your home loan.
Personal loan (five years) at 14 percent interest= almost $10,000 in interest
Home loan (25 years) at 6 percent interest = almost $28,000 in interest
To help us make the right choice, Aussie Home Loans have just launched the debt comparison calculator. It weights up a personal loan against adding more debt to your mortgage.
Try it out here:
http://www.aussie.com.au/car-personal-loan/debt-comparison-calculator.htm
Tips to borrow responsibly:
John Symond says do your homework.
"Don't just think by putting on your home loan interest rate is going to save you money. It could cost you three times the amount of interest," he says.
Finance commentator Ross Greenwood says whatever loan you choose, pay it back as quickly as possible.
"If you've got a house, borrow against your house but increase your repayments so that you can repay that $20,000 in three or four years time as quickly as you possibly can," he says.
Read more about loans at ninemsn Money:
Compare 1000s of personal loans by rate, lender and star rating
Personal loan calculator: how much can you borrow?
