When we plan to renovate our homes, the thought of funds kicks in sooner or later. Some of us may have got a chance to save up money for financing the improvements. But those who do not have enough funds to carry out the project – may find themselves asking whether home improvement loans are worth it? It is one of the convenient ways to pay for your home extensions or renovation planning. But borrowing a personal loan for home improvement involves risk too.
What is a home improvement loan?
It a personal loan that is borrowed with the purpose of using the funds for making improvements to your home. You do not have to use your home as security while borrowing this loan. That means if you fail to keep up with the repayments, the lender cannot possess your property. Typically, you will be offered to borrow a sum of £1,000 to £35,000 that is repayable over a maximum period of 7 years.
How much can I borrow for home improvements?
Different loan providers have different lending criteria. However, the amount that you can borrow depends on:
- Your credit score
- Income
- Expenses
- Loan term
- Employment status
When you apply for a personal home improvement loan, lenders will thoroughly assess your profile and after that, they will offer a quote. The interest rate of the loan also depends on the factors that are mentioned above.
Can I get a home improvement loan?
You can borrow a home improvement loan if you are on or above 18 years of age. It is not the only eligibility criteria for you to borrow a loan. Please note that lenders do not have the same criteria when it comes to lending. It may vary from lender to lender. Here are a few things that you should consider before taking out a home improvement loan in the UK:
- Calculate how much you need to borrow and how much you can afford to repay each month.
- Scan your credit report for errors and fix it before applying to any lender.
- Space our loan applications by at least 3 months to avoid rejection.
- Your monthly repayment amount will be lower if you choose a longer repayment term. But you have to pay more in interest.
- If you are applying for a loan for an amount that is above £8000, interest rates can be competitive.
What are the disadvantages of a home improvement loan?
If you are already struggling with your finances, you should not borrow a personal loan. Because getting a loan without any certainty of repaying it may cause more trouble for you. To help you make an informed decision, we have discussed a few disadvantages of borrowing a loan for home improvement:
- If you are looking to borrow a small amount, let say, £1,000 to £3,000 – you may receive quotes with high-interest rates from lenders.
- There may be an early repayment fee should you want to pay off the loan earlier than the agreed date.
- Missing repayments will have a negative impact on your credit score, which will make it harder for you to get good interest rates in the future.
Are home improvement loans worth it?
By renovating your property, you will be making the most of your home. It’s a great way to move up on the property ladder too. The cost of moving out to a new property is comparatively higher with a surge in stamp duty and all other associated costs. Borrowing a home improvement loan is certainly worth it if you can manage the repayments on time. That’s the only thing you need to take care of when borrowing an unsecured personal loan. Also, if your score is not good, timely repayments will gradually improve your credit score.
Assess your financial condition before you consider borrowing a loan.