HOME IMPROVEMENT LOANS: Tips on Getting Home Improvement Loans in the UK

home improvement loans
Mortgage loading real estate property with loan money bank concept.

Home improvements can help you make the most of your property, whether you want to convert your attic, enlarge the lounge, renovate your kitchen, or simply redecorate. It can be an excellent method to raise the value of your home while also increasing your enjoyment of the room. Of course, home improvements may be costly, and saving money isn’t always an option – especially if your family is rapidly expanding. Home improvement loans might assist you in making modifications now while spreading the cost over a period of months or years in the UK.

What are Home Improvement Loans?

Home improvement loans allow you to borrow a fixed sum to fund home improvements to your property in the UK. This is usually in the form of an unsecured personal loan, but you can also secure the loan against your home, which allows you to borrow greater sums.

Home improvements, such as a new kitchen, bathroom, or extension, not only provide more space for your growing family, but they may also add significant value to your property if you decide to sell it in the future. For example, transforming your garage into additional living space might potentially increase the value of your home by 20%.

What are the Types of Home Improvement Loans?

There are two sorts of home improvement loans to think about:

#1. Unsecured Home improvement loans

This form of loan, also known as an unsecured personal loan, allows you to borrow without putting up an item as collateral, such as your car or house.

Because loan acceptance is based on your capacity to repay the loan, lenders will want to make sure you have a strong credit history. They might also want to know if you’re still working. Stable work will persuade lenders that you will be able to repay the loan.

If you plan to spend £6,000 to £10,000 on a modest project, such as remodelling your kitchen, an unsecured loan may be a suitable option to access the funds you require. However, there are a few factors to think about:

Although you will not lose your home if you take out an unsecured loan, failure to make payments may result in a County Court Judgment (CCJ) against you, which will severely harm your credit rating.

You may not be able to borrow as much as you would with a secured loan because there is no collateral as security.

#2. Secured Home Improvement Loans

This sort of loan, also known as a homeowner’s or home equity loan, allows you to borrow a larger sum of money by using the equity or value of your home as collateral. You may be eligible to borrow up to £100,000 with a secured home improvement loan, depending on your credit history and financial position.

This sort of loan is appropriate for large restoration projects, such as purchasing an old house that requires structural repairs and total modernization. Interest rates are frequently lower and stable for a longer period of time, which aids with budgeting.

A secured loan, on the other hand, necessitates the following considerations:

  • If you fall behind on your secured loan payments, your home may be repossessed.
  • If you try to pay off your secured loan early, certain lenders may charge you a penalty.

Why is it critical to determine how much money you require?

Knowing how much money you need to borrow will help you select where to look for it.

  • If you only need a modest sum of money for a short period of time, consider using an interest-free overdraft, if you have one. If not, it may be worthwhile to investigate various current accounts that provide this service.
  • Credit cards that have no interest on purchases may be worth considering, especially if you need to buy something specific. As long as you repay what you owe within the interest-free term (and make at least the minimum monthly payments on time), you may be confident that the credit hasn’t cost you a dime more.

If you require a larger sum of money, a personal loan may be the solution. Borrowing a minimum of £1,000 is normally possible, with top limits varying depending on the lender. Most lenders will offer you up to £25,000, with some going as high as £50,000.

Customers with the best credit ratings get the best APRs (annual percentage rate; this is the amount of interest plus any fees you pay on top of your loan). That’s why unless it’s labelled as a guaranteed APR, you should be aware that the APR you see may not be the one you get when you apply for a loan.

Should I get Home Improvement Loans that are Unsecured or Secured?

The type of loan you select will be determined by your circumstances, choices, and the amount you need to borrow.

  • An unsecured personal loan of up to £25,000 may be sufficient to pay the costs of your home improvements up to this amount. With this form of loan, you can borrow a lump sum of money (if granted) without putting up any collateral.
  • A secured homeowner loan of up to £100,000 could be the answer if you’re planning an extension or big improvements. You can borrow a lump sum of money against your property with this sort of loan. If you do not make the payments, you risk having your home repossessed.

You should also consider the following:

  • Your credit score — If you’re a homeowner with less-than-perfect credit, you’re more likely to get approved for a secured loan than an unsecured loan because your home can be used as collateral.
  • How quickly you wish to repay the loan — homeowner loans have longer payback terms than unsecured personal loans.

Why Home Improvement Loans can be a good idea for you

According to a Compare the Market survey, 32% of homeowners are considering some type of home remodelling. If you’re one of them, a home improvement loan may be able to assist you.

By giving you the funds you require upfront, you will be able to proceed with making the necessary improvements to your home while having the option of repaying the loan over an agreed-upon length of time.

Home improvement loans provide the following advantages:

  • Quick access to your money: once authorised, you might have the funds for your renovation project in your bank account within days if not hours.
  • You have the option of extending the time it takes to repay a home improvement loan. Repayment terms might range from one to seven years, and even longer.
  • A fixed-rate loan allows you to budget for your monthly payments.
  • You have the option of borrowing a specific sum. However, make certain that you can afford the monthly installments.
  • You have control over how you spend your money. In most circumstances, you are not required to say why you desire the money. For example, if you end up spending less on a home improvement project than expected, you may want to use the remaining loan funds for anything else.

What should I think about while getting Home Improvement Loans in the UK?

  • Your budget: When deciding how much to borrow, consider the total cost of your project. Unforeseen complications may arise during a home renovation, causing you to go over budget.
  • The interest rate: Loans can have variable interest rates, which means that monthly payments might fluctuate. If you also have a variable-rate mortgage, you could be stung twice if interest rates rise.
  • Early repayment penalties: Some lenders will charge you a penalty if you pay off your loan early, so read the fine print.

Can I include home improvement expenses in my mortgage?

A mortgage lender can help you raise financing for home improvements. There are several ways to accomplish this, including:

#1. Further Advance

A further advance entails borrowing additional funds from your present mortgage lender. It’s frequently at a different rate than your mortgage. You’ll need to obtain your lender’s approval, and you should carefully analyse the conditions and hazards.

Loans with a further advance may have cheaper interest rates and allow you to spread the cost over a longer period of time. However, when comparing a further advance to other borrowing alternatives, consider the term (how long you make repayments for) as well, as this can make a significant difference in how much you pay overall.

Assume you wish to borrow £20,000 and have a choice between:

  • A second advance with a 5% interest rate and a 25-year term
  • A loan has a ten percent interest rate and a five-year repayment period.

At first glance, the further advance may appear to be the better value due to the lower interest rate. The difference in terms, however, implies that the further advance will wind up costing significantly more: you’ll pay a total of £15,075 in interest on the further advance, compared to £5,496 in interest on the loan.

A further advance may still be the best decision in some cases but examine your options carefully. Remember that a further advance will increase your monthly mortgage payments, and if you can’t keep up with them, you could lose your home.

#2. Remortgage

Remortgaging usually entails transferring to a new mortgage provider, however, it can also entail switching to a different mortgage package with your present provider. Remortgaging may help you acquire finances for home improvements in any case.

So, how exactly does it work? When you remortgage, you borrow a higher sum — more than the amount you still owe on your home. Assume you purchased your home for £200,000 and have paid off £50,000 of it. Your mortgage provides the remaining £150,000. So, if you remortgage and borrow £170,000, you’ll have an extra £20,000 for your dream kitchen renovation.

Consider the risks, expenses, and terms of remortgaging carefully. Consider how much interest you’ll pay in total, just as you would with a further advance. Remember that the loan will be secured against your property, so if you fail to make the payments, you may lose your home. In addition, if you pay off your debt early, you may be charged an early payback fee.

How can I apply for Home Improvement Loans in the UK?

Here are some recommendations for obtaining loans to support home improvement in the UK:

#1. You should know what you want

Determine what improvements you wish to make to your home and examine how the changes may affect the property’s value. Investigate the expenses extensively and, if possible, obtain firm quotes from suppliers.

#2. Determine what you can afford.

Examine your income, expenses, and financial responsibilities. Determine how much you can afford to pay back each month. Remember to factor in your long-term financial goals.

#3. Understand where you stand with lenders.

Checking your Credit Score will give you a decent indication of how lenders may perceive you. This figure represents your odds of obtaining a loan accepted — the greater it is, the better.

#4. Find a loan that works for you.

Compare loans from various lenders. Before selecting an offer, make sure you thoroughly read the terms and conditions.

#5. Examine your eligibility.

When you compare deals with us, you can get an estimate of your chances of acceptance for personal loans.

#6 Make preparations for your application.

Typically, you can apply for a loan online. Alternatively, you may be able to apply in person at one of the lender’s branches if you like.

#7. Distribute your applications evenly.

If you must submit more than one loan application, attempt to space them out as much as possible. Applying too frequently in a short period of time will damage your credit score, making it more difficult to get authorised by lenders.

Can I get Home improvement Loans in the UK even if I have Bad Credit?

Even if you have low credit, you can acquire home improvement loans in the UK. Lenders, on the other hand, may offer you lesser limits and higher interest rates in order to lessen the chance of you not repaying them. They may also want to use your home as collateral, which means you could lose it if you don’t make your payments on time. Learn more about loans for those with poor credit.

Before asking for a loan, you should endeavour to improve your credit score. Increasing your credit score can increase your chances of being approved for better bargains.

What should I Do with My Home Improvement Loans?

Responsible debt management will safeguard and maybe increase your credit score. This is because lenders prefer to see that you have successfully repaid credit in the past. Here are our top loan management tips:

  • Make your monthly payments on time and in full. Missed or late payments may result in additional costs, as well as a default or CCJ County Court Judgment).
  • Set up a direct debit to make your monthly payments automatically – that way, you won’t forget.
  • Maintain a watchful eye on your spending. Try to stick to your home improvement budget, and keep track of your other monthly improvements.
  • If you do require additional credit, ensure that you can comfortably handle the payments on top of your existing loans, and be prepared for your credit score to drop as a result of the additional borrowing.

Home Improvement Loans FAQs

Which loan is best for a house that needs improvements?

FHA 203(k) Loans: FHA 203(k) loans are available through the Federal Housing Administration and allow for lower incomes and credit scores than conventional mortgages. They are suitable for the majority of home improvement projects.

What does it cost to renovate a house?

The typical cost of remodelling a house ranges from $19,800 to $73,200, depending on the complexity of the work, the size of the home, and the quality of materials and appliances used. On average, a whole house renovation costs $15 to $60 per square foot, whereas upgrading a kitchen or bathroom costs $100 to $250 per square foot.

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