Loans for Home Improvement
If you want to wake up in your dream house without packing up your stuff and putting it on a donkey’s back, a home improvement loan could transform the property you already live in. For homeowners who want to carry out projects to add value to their home, or to help it fit their needs better, this form of personal loan could be the enlightened choice.
So, whether you want to add an extra bedroom for the impending arrival of a teeny-tiny new family member, or you’ve got your sights on a fancy new kitchen, pull up a pew and let the wonders of the home improvement loan demystify before you…
What is a Home Improvement Loan?
A home improvement loan is a type of personal loan taken out to make changes to your property. You might want to add some extras or extend your home so that you bank more coins in a future sale. Or you may simply want to avoid the extra expense and hassle of moving if your home isn’t quite perfect for you right now.
Whether you’re raiding some savings and require a top-up of funds or you are wholly relying on a home improvement loan to kick-start your project, you can choose to borrow from a loan provider to give your plan a boost. You agree a set amount of time to pay the fixed sum back, plus the interest you will pay the lender, on top of the original sum for the privilege of borrowing their money.
Loans for home improvement: a summary
- For property repairs
- For property extensions
- Usually fixed interest
Along with finding the best possible deal for you, you should always remember that – depending on what changes you’re planning to make – the money you spend on a property won’t always be reflected in the future sale price. Some home improvements are more likely to add long-term value than others, so do your DIY homework before you set the concrete mixer spinning.
Compare Home Improvement Loans
Smaller loans for home remodeling projects tend to be unsecured loans, which means they usually have fixed interest rates. You pay a fixed sum back every month and know what’s coming out of your budget.
However, you can also choose to take out a secured loan that uses your home as collateral. Doing so could allow you to borrow a greater sum and you could access lower interest rates too. Well, that sounds great doesn’t it? Whoa there horsey, it’s not quite that simple. Never forget that putting your home up as security means it’s at potential risk of being pulled from under you.
With either avenue, you may find that borrowing slightly more earns you a better interest rate, but that’s no reason to start adding a swimming pool onto your improvement plans. Wisdom dictates that it’s not smart to borrow more than you need, unless the total you pay back works out less.
For example, if you want to borrow around £3,900 for a bathroom with a special spa bath, you may find that borrowing £4,000 gets you a better interest rate, and means you pay less back overall.
Look at the Total Costs
Whichever path you trot down, you’ll want to compare deals as straightforwardly as possible. This means looking at the total cost of a home improvement loan, not just the representative interest rates or monthly repayment cost.
It’s incredibly important to know you can afford to pay back the monthly sum, and for the full length of the loan. After all, you don’t want to live on porridge alone, you’ll get scurvy. If you’d like to enjoy a few months free of repayments while you get your jobs done, look out for deals that include a repayment holiday.
Of course, there’s a little more to getting a good deal than just looking at the interest rate advertised, so let’s look at the bigger picture. Firstly, remember that the representative annual percentage rate (APR) shown will be available to 51% of people accepted for the loan, which means the most attractive rate isn’t secured by 49%. Next, look out for things like early redemption fees. These may be payable if you want to overpay repayments or pay off your loan early.
Arrangement Fees for Home Improvement Loans
Arrangement fees can also be applied by lenders, which can bump up the total cost you’ll payback on the money you’ve borrowed. These fees will normally be included in your APR, so be sure to compare APRs as well as interest rates when comparing deals.
To help you avoid bad karma by missing these important charges, our MoneyMatcher highlights important things like this on the ‘more info’ tab. It also produces a table tailored to your requirements and matches you up with deals you’re more likely to be accepted for.
Is a Home Improvement Loan Right for Me?
You should always try to match your needs to the best form of borrowing for you. When it comes to making your home a top-notch place to live, you may be after items that can be purchased within the limit of a 0% credit card. If this is the case, be sure you can pay off your full balance before interest kicks in, and that you stick to spending on the task in hand only.
If your transformation plans involve going green, did you know that some providers now offer Green Deal Loans for things like new boilers, insulation or fitting solar panels?
Finding the right kind of credit for you can make a whole lot of difference when budgeting for something like an extension. So, just like stepping into your new spa bath, get a good overview of what’s available before you plunge in waist deep.