Last updated: 16/10/2020 | Estimated Reading Time: 4 minutes
Home improvement loans
If you are looking to upgrade your home without having to upend yourself and your family to a whole new house, taking out a home improvement loan to fund it could be a really good option for you. Home improvement loans can help you get that dream extension, fresh kitchen, or energy efficient double glazed windows, at affordable rates and little hassle.
In this guide we will take a look at what home improvement loans are, how to get them, and the options available so that you can decide what the best loans are for you.
In This Guide:
- What are home improvement loans?
- Compare home improvement loans: Secured vs. unsecured loans
- Things to look out for when choosing a home improvement loan
- What are the best home improvement loans?
What are home improvement loans?
You can get a home improvement loan from lenders such as banks, private businesses or credit unions, which usually take the form of a single payment, which then has to be paid back with interest over an agreed term. This gives you the upfront cash to renovate your home.
You will normally be asked a few simple questions about your credit rating score, how much you would like to take out, and how long you would like to pay it back, which will then be used to calculate the final terms of your loan.
Compare home improvement loans: Secured vs. unsecured loans
When you sign up for your loan, you will be asked if you want it to be secured or unsecured. These both have their own advantages and disadvantages, so it is worth knowing what they are so that you can be sure of what is the best for you:
- Secured Loans: These are guaranteed by your home if you own the home or have a mortgage. The security that this gives lenders allows them to provide bigger loans than unsecured loans (usually up to £100,000), as well as providing better interest rates. However, as these are secured by your home, if you are unable to pay the loan back, your house will be liable to be repossess your house in order to make back the money that they have lost out on.
- Unsecured Loans: These loans are not guaranteed by anything that you own, but in order for lenders to feel comfortable with lending you money, you will usually need a good credit rating. The interest rates for these will also be higher than secured loans, and as they are deemed personal loans, the maximum that is lent out is £25,000.
Things to look out for when choosing a home improvement loan
- Length of contract: This is flexible to your needs, but bear in mind that for longer contracts, the overall amount that you will have to pay back more in interest will usually be more than for shorter contracts.
- Interest rates: Some lenders may be able to offer you better interest rates than others, so be sure to compare loans. The repayments can also change month to month, but if you want the security of knowing how much you are spending, choose a fixed rate plan
- Early repayment fees: If you wish to pay back your loan quicker than the agreed term, you may be liable to pay an extra fee, so make sure you check the small print.
- The size of the loan: It is worth making sure before you take out your loan that you are sure how much needs to be spent on it. It is common for people to take out more than needed for their improvements, and means that they would have to pay more in interest payments than originally needed.
What are the best home improvement loans?
In order to work out what the best options for home improvement loans are for you, the best thing to do is to use an online smart search tool to do a loan comparison. These will allow you to suss out loans that you will most likely have accepted when you apply for one, without having to contact any lenders.
If you choose to apply for loans and then back out of them, this could negatively impact your credit score, and make it much harder for you to get a loan in the future.
It is as simple as typing in a few details such as your credit score and employment status, and you will be given a list of potential options where you can directly compare interest rates.