Home improvement loans

Getting a loan for renovation, extension or redecoration

Home improvements can help you make the most of your property – whether you want to convert your attic, extend the lounge, renovate your kitchen, or simply redecorate. It can be a great way to increase the value of your home, not to mention your enjoyment of the space.

Of course, home improvements can be expensive, and saving up isn’t always an option – particularly if your family’s growing quickly. A home improvement loan can help you make changes now and spread the cost over a number of months or years.

Which type of loan is best for home improvements?

There are several different types of loans including personal loans, secured loans, and guarantor loans. But which is best for financing your home improvements? It often depends on how much you need to borrow and what your finances are like.

To help you decide which type of loan to use for your home improvements, we’ve set out the pros and cons of each. Remember, you should always read the terms and conditions of a loan carefully before you apply.

Personal loans

Pros

  • You can borrow small amounts, often as little as £1,000. This can be useful if you want to make minor home improvements
  • You may be allowed to start repayments after the first few months, rather than immediately
  • You don’t have to use your home as security

Cons

  • You may not be able to borrow very large amounts
  • Interest rates on small loans may be high
  • You’ll need a good credit score to get approved for the best deals

Pros

  • You can borrow large amounts, sometimes up to around £100,000. This can be useful for major renovations for example
  • Low credit score? You may have more luck getting approved for a secured loan than a personal one
  • You may have longer to pay the loan back

Cons

  • The amount you can borrow may be limited by your property’s value and how much of it you own
  • If you don’t keep up repayments, you could risk losing your home
  • Typically, you can’t borrow less than £5,000

Pros

  • If you have bad credit, a guarantor can help you get approved for a loan
  • You don’t have to use your home as security

Cons

  • You may not be able to borrow very large amounts
  • You must find a suitable guarantor
  • Your guarantor must pay your debt if you can’t, which could put you in an awkward situation

You can compare loans from across the UK market with Experian. It’s completely free, and it won’t hurt your credit score. Remember, we’re a credit broker, not a lender† – that means we can help you find deals, but we can’t give you credit or make lending decisions.

What are my alternatives to a loan?

Home improvement loan or credit card?

If you want to borrow a relatively small amount to make improvements to your home, you could consider using a purchase credit card.

Purchase cards tend to offer a 0% interest rate for a promotional period, which may last between 3-20 months. As long as you pay off the card in full before this period ends, you won’t have to pay interest. However, if you have an outstanding balance when the period ends, you’ll be put on the lender’s standard rate, which can end up being expensive.

So, if you’re confident you can repay your debt within the promotional period, a purchase card could be your best option. But if you’d prefer fixed, upfront costs then you’re probably better off with a loan.

Compare credit cards or loans with Experian – it’s free.

Can I add home improvement costs to my mortgage?

It’s possible to raise funds for home improvements using a mortgage lender. There are a few ways to do this, including:

Further advance

A further advance means borrowing more money from your current mortgage lender. It’s usually at a different interest rate to your mortgage. You’ll need to get your lender’s agreement, and you should consider the terms and risks carefully.

A further advance may offer lower interest rates to loans, and allow you to spread the cost over a longer period of time. However, when you compare a further advance with other borrowing options, don’t just look at the interest rate – consider the term (how long you make repayments for) too, as this can make a big difference to how much you pay overall.

For example, say you want to borrow £20,000, and you’re choosing between:

  1. A further advance with a 5% interest rate and a 25 year term
  2. A loan with a 10% interest rate and a five year term

On first glance, the further advance can seem like the better deal because it has a lower interest rate. However, the difference between the terms means the further advance will end up costing much more: you’d pay a total of £15,075 in interest on the further advance, compared to £5,496 in interest on the loan.

A further advance can still be the right choice in some circumstances, but weigh up your options carefully. Remember, a further advance will increase your monthly mortgage repayments, and you could lose your home if you can’t keep up with them.

Remortgage

Remortgaging typically means changing to a new mortgage provider, although it can also mean switching to a different mortgage deal with your current provider. Either way, remortgaging may help you raise funds for home improvements.

So how does it work? The idea is you borrow a larger amount when you remortgage – more than the amount you still owe on your home. For example, say you bought your home for £200,000, and you’ve paid off £50,000 of this. The remaining £150,000 is borrowed with your mortgage. So, if you remortgage and borrow £170,000, you’ll have an extra £20,000 for that kitchen renovation you’ve been dreaming of.

Think carefully about the risks, costs and terms of remortgaging. As with a further advance, consider how much you’ll pay in interest overall. Remember that the debt will be secured against your property, so you risk losing your home if you don’t meet the repayments. Also, if you want to pay off the debt early, you may be charged an early repayment fee.

How can I get a home improvements loan?

Here are our suggested steps for getting a loan to fund home improvements:

  • Know what you want. Decide what work you want done to your home, and consider how the changes will impact the property’s value. Research the costs thoroughly, and get firm quotes from suppliers if you can.
  • Work out what you can afford. Review your income, spending, and financial commitments. Calculate how much you can afford to repay each month. Remember to take future financial plans into consideration too.
  • Know where you stand with lenders. You can get a good idea of how lenders may see you by checking your free Experian Credit Score. This number reflects your chances of getting approved for a loan – the higher it is, the better.
  • Find a loan that fits. Compare loans from a variety of providers. Make sure you carefully consider the terms and conditions of each deal before choosing one.
  • Check your eligibility. You can get an idea of your chances of approval for personal loans when you compare deals with us.
  • Prepare for your application. You can usually apply for a loan online. Or, if you prefer, you may be able to apply in person at one of the lender’s branches. Learn more about applying for a loan here.
  • Space out your applications. If you need to make more than one loan application, try to leave a gap between them. Applying too often in a short space of time can lower your credit score, meaning you may find it harder to get approved by lenders.

Can I get a home improvements loan with bad credit?

It’s possible to get a home improvement loan if you have bad credit. However, lenders may offer you lower limits and higher rates, as this helps them reduce the risk of you not paying them back. They may also want to use your home as security, meaning you could lose it if you don’t keep up with repayments. Find out more about loans for people with bad credit.

You may want to try and improve your credit score before applying for a loan. Boosting your score can improve your chances of getting approved for better deals.

How should I manage my home improvements loan?

Managing your loan responsibly will protect your credit score and may even improve it. This is because lenders typically like to see that you’ve successfully paid back credit in the past. Here are our top tips for a well-managed loan:

  1. Make your repayments on time and in full each month. Missed or late payments could lead to extra fees, as well as a default or CCJ County Court Judgement)
  2. Set up a direct debit to make your payments automatically every month – that way, you won’t forget them
  3. Keep a close eye on your spending. Try and stick to your budget for home improvements, and manage your other monthly outgoings carefully
  4. Try not to take out more credit while you’re paying off your loan
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