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SECURED LOANS: YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE, LOAN OR ANY OTHER DEBT SECURED ON IT.
Home improvement loans
Home improvements can be a great way to make a property a better place for you and your family to live, while increasing its value at the same time.
However, even though making improvements to your current house or flat often works out a lot cheaper than trading up to a larger home, many projects still require a significant financial outlay.
Whether you want a new kitchen, need to repair your roof or are planning an extension that will transform your home, you may therefore have to borrow money to fund the work. A low-rate personal loan can be one of the best ways to do this.
This guide to home improvement loans should help you to decide whether it is the right finance option for you.
Advantages of a home improvement loan
A personal loan offering the chance to borrow up to £15,000 over five years, for example, is a popular means of funding home improvements.
You can currently borrow between £7,500 and £15,000 at an interest rate of 5% or thereabouts. This makes a loan of this kind a very cheap way, in historical terms, to access the extra cash you need.
Advantages of choosing a personal loan also include that your payments are fixed – making it easier to budget – and that you can generally choose to repay the amount borrowed over between one and five (or at least three) years.
So while you will pay less interest overall if you can afford to repay the loan within a shorter timeframe, you also have the option of spreading the cost and reducing the size of the regular repayments if necessary.
Some loans also offer the flexibility of a payment holiday of say two or three months at the start of the agreement.
Disadvantages of a home improvement loan
The best loan rates are generally for borrowers looking to make repayments over three and five years, so you will often pay a higher interest rate to borrow over a shorter term.
The interest charges on larger or smaller amounts can prove a lot more expensive too, while your credit score has a significant impact both on the interest rate you will pay on a loan, and the amount you will be able to borrow.
As rejected credit applications have a detrimental effect on your score, it therefore makes sense to check your credit file first to see whether you are likely to be approved or not.
MoneySupermarket can help you to do this; all you have to do is sign up for a free trial of a credit file checking service. Either way, it is vital to ensure that you will be able to afford the repayments.
Otherwise, you risk being hit with punitive penalty charges, not to mention damaging your credit file and therefore your chances of being accepted for top deals in the future.
Alternatives to a home improvement loan
If you find that your credit score is preventing you being accepted for the best home improvement loans, one option is to consider a secured, or homeowner, loan that uses your home as security. But falling behind with the repayments on a loan of this kind will put the roof over your head at risk.
However, secured loans are a good choice for anyone planning a big project as they can be used to borrow up to £100,000 – depending on how much available equity you have in your home.
For smaller amounts, meanwhile, a 0% credit card is also an option – as long as you are disciplined enough to limit your spending and manage you repayment plan so that the balance is paid off by the time the interest-free period comes to an end.
Finding the right home improvement loan
Personal loans deals, just like those available on other financial products such as credit cards and bank accounts, vary widely. But securing the best terms and lowest interest rate possible can make a massive difference to the amount you repay.
So it makes sense to shop around. You can do this quickly and easily by using the MoneySupermarket loans channel to compare hundreds of different loans from a wide range of lenders.
The Help me find a loan tool can speed up the process of finding the best deals for your individual circumstances even more – all you have to do is enter a few details such as your name, your annual income and the amount you want to borrow.
Moneysupermarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.