Equity Release or Bank Loan? Which Is Best?

Are you trying to decide between equity release and a bank loan? This can be a tricky choice. But don’t worry, we’re here to help you.

Our website is visited by 7,000 people each month who want to understand equity release. So, you’re not alone.

In this article, we will explore:

• What equity release is and how it works.
• The risks and rewards of releasing equity from your home.
• How to get a fair quote for equity release.
• The differences between equity release and a bank loan.
• The latest rates for equity release.

We know that thinking about money can be hard. There are lots of big words, and it can all seem very confusing, but we promise to make it easy for you to understand. We’ve heard lots of questions about equity release and bank loans, and we’re here to answer them all.

Remember, you’re not alone in this. We’re here to help you make the best choice for your money.

Let’s get started and learn more about equity release and bank loans.

Is equity release better than a loan?

Equity release will usually cost more to repay than a secured or personal loan, but your age may prevent you from getting approved for a bank loan. 

If you want to leave your home to loved ones when you’re gone, you should explore the possibility of taking out a loan before considering equity release. But if this isn’t a concern, an equity release plan may be more beneficial to you in any case. 

It’s best to seek personalised financial advice or equity release advice for a bespoke answer to this question. 

Releasing equity vs unsecured personal loan

You might have ended up on this guide wanting to consider releasing equity or a loan as a younger homeowner. If that’s the case, we’ve got information for you as well.

Securing a loan against your property can be beneficial to access larger amounts of credit and secure a lower interest rate – in comparison to unsecured lending. But you should be aware that releasing equity puts your home at risk if you don’t repay.

What are the latest equity release interest rates?

Equity release interest rates range from as low as 2% to close to 10%. Some can be even higher. If you want more information on how equity release interest is applied, including an explanation of compounding interest rates, you should check out our equity release rates guide. 

This might help you realise the costs of equity release vs the costs of a bank loan. 

Equity release or bank loan (Quick recap!)

Some senior homeowners won’t be able to use a bank loan or any other type of loan because they are nearing retirement and the loan won’t be deemed affordable by the lender. 

These homeowners can fall back on equity release plans to borrow money if suitable, as these plans don’t require monthly repayments. But if you’re suitable for both – how do you choose?

Bank loans will be cheaper to repay than equity releases over the long run, but if you don’t need to worry about gifting property or inheritance to someone, the more expensive equity release plan may be more suitable. It’s best to discuss these options with an equity release adviser.