A room with a view

Property developers on London’s Hyde Park have revealed that average prices of a property overlooking the park was now in excess of £20 million and that price increase showed no sign of slowing.

These properties work out at £6,000 per square foot but on the plus side the pads have been decorated and fitted to suit even the most demanding multi-millionaire.

If you think that your property is worth investing in then it could be worth considering making some home improvements but if you aren’t sure where the cash is going to come from then it could be worth considering a secured or personal loan depending on how ambitious your plans are.

Secured loan

A secured loan is a loan which uses your property as collateral against defaulting. This means that if you fail to make repayments of the loan then you could have your house repossessed. This is obviously very serious, but by securing the loan against your house you are giving your lender extra security which in turn makes them more likely to offer you a better deal on the loan.

Radical rates

Analysis of the loan market by MoneyExpert reveals that the differences in interest rates between a secured and unsecured loan, one where you offer the lender no more security than your word that you will repay the loan are significant.

The average APR on an unsecured loan of £20,000 to be repaid over four years for example is 7.8% compared to 6.4% on a secured loan. This 1.4% difference will save you hundreds of pounds in repayments.

With £20,000 it’s possible to make extensive home improvements such as a new kitchen or conservatory which could add significant value to your house.

Credit rating

Rates such as 6.4% are only going to be open to borrowers with a strong credit rating however. If you’ve failed to make credit card or loan repayments in the past then you may struggle to get such a good deal and may have to opt for a loan with a higher interest rate such as the Norton Finance Plan N-9 loan which comes with an interest rate of 10.9%. With this loan your monthly repayment will come to £511 and mean that you repay £24,529 in total.

Start small

If you’re worried that you won’t be accepted for a competitive secured loan or that it might be too much of a financial commitment then a smaller more manageable unsecured loan could do the trick.

Unsecured loans start with rates as low as 5.45% with provider Zopa and high street names such as Lloyds TSB offer rates from around 6.45%. With a smaller loan of £3000 you might be able to complete the first part of your home improvement plan while you save to complete the project.

Before you sign

Taking a loan is a big commitment so be sure you understand what is involved before you sign on the bottom line. Having said this, repaying a couple of hundred pounds a month could be the only way to make the big home improvements you want and long tern these could be a great investment.

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