Edit Content

Home Equity Loan Vs Home Improvement Loan

Home Equity Loan | Home Improvement Loan | UK | LoanTube

Your family is growing and your home doesn’t have enough rooms? Want to keep up with the trend by updating your kitchen? Need space to place your new bathtub? Your home may need constant changes (minor or major) as per your changing lifestyle. Does that mean every time any such thing happens, you will have to pack your bags and move to a new home? Personal loans can give you a sense of financial relief if you consider improving your current home rather than selling it off to buy or rent another place. Buying a new place is an expensive option and renting one may also prove to be expensive.

Many of us rely on a home equity loan or a home improvement loan when it comes to upscaling our property. Both are loans, so, is there a difference between them? YES. They work differently.

Let us find out how.

Maximise your options: Compare and apply for loans below with LoanTube

Apply Filters

Loan Amount
Loan Amount - slider
Loan Amount - inputs
£
£
Loan Term
Loan Term - slider
1 Years20 Years
Representative APR
Representative APR - slider
6%1333%
Loan Amount
Loan Amount - slider
£250£100000
Representative APR
Representative APR - slider
6%1333%
Loan Term
Loan Term - slider
1 Years20 Years

Loan Amount

£4000 -

£20000

Norwich Trust

Loan Term

1 -

10 years

4.8/5

4.8/5

Representative APR

31.90%

Minimum Age

21 Years

Minimum Income

£2000 per month

Representative Example: £12,000 over 66 months, 31.9% APR fixed. Monthly payment £358.22 Annual interest rate 28.01% fixed. Interest payable £11,642.52. Total repayable £23,642.52.

4.8/5

4.8/5

Norwich Trust

Loan Amount

£4000 -

£20000

Loan Term

1 -

10 years

Representative APR

31.90%

Minimum Age

21 Years

Minimum Income

£2000 per month

Representative Example: £12,000 over 66 months, 31.9% APR fixed. Monthly payment £358.22 Annual interest rate 28.01% fixed. Interest payable £11,642.52. Total repayable £23,642.52.

Loan Amount

£5000 -

£100000

Evolution Money Loans

Loan Term

1 -

20 years

4.5/5

4.5/5

Representative APR

28.96%

Minimum Age

18 years

Minimum Income

Not mentioned

Representative Example: Loan Amount: £20950.00, Loan Term: 85 Months, Interest Rate: 23.00% PA Variable. Monthly Repayments: £537.44. Total Amount Repayable: £45,682.15. This example includes a Product Fee of £2,095.00 (10% of the loan amount) and a Lending Fee of £714.00

4.5/5

4.5/5

Evolution Money Loans

Loan Amount

£5000 -

£100000

Loan Term

1 -

20 years

Representative APR

28.96%

Minimum Age

18 years

Minimum Income

Not mentioned

Representative Example: Loan Amount: £20950.00, Loan Term: 85 Months, Interest Rate: 23.00% PA Variable. Monthly Repayments: £537.44. Total Amount Repayable: £45,682.15. This example includes a Product Fee of £2,095.00 (10% of the loan amount) and a Lending Fee of £714.00

Loan Amount

£1000 -

£10000

1Plus1 Guarantor Loans

Loan Term

1 -

5 years

4.4/5

4.4/5

Representative APR

39.90%

Minimum Age

18 years

Minimum Income

Not mentioned

Representative Example: Borrowing £3000 over 36 months with a representative APR of 39.9% (variable),the amount payable would be £134.21 a month,with a total cost of credit of £1831.56 and a total amount payable of £4831.56.

4.4/5

4.4/5

1Plus1 Guarantor Loans

Loan Amount

£1000 -

£10000

Loan Term

1 -

5 years

Representative APR

39.90%

Minimum Age

18 years

Minimum Income

Not mentioned

Representative Example: Borrowing £3000 over 36 months with a representative APR of 39.9% (variable),the amount payable would be £134.21 a month,with a total cost of credit of £1831.56 and a total amount payable of £4831.56.

What is a home equity loan?

  • A home equity loan is also called as the second mortgage. You can borrow a lump sum amount against the “equity” of your home. The way your first mortgage is secured against your home, a home equity loan is also secured against your home. For this reason, it is called as the second mortgage.
  • Deduct the current market value of your home from the amount that owes on your mortgage – the result is the equity.
  • Suppose at the time of purchasing the house, its cost was £500,000 and due to development in your locality, its current market value has increased to £550,000. You are regular with your mortgage payments and £270,000 is left unpaid. So, the equity available will be £280,000.

What is a home improvement loan?

A home improvement loan is a personal loan that you may borrow without securing it against your home. That means if you default at the loan, your home will not be at the risk of repossession by the lender. You can borrow an amount as low as £1,000 and as high as £35,000. Different lenders may offer you a different borrowing range depending on your credit profile.

Is there a difference between a home equity loan and a home improvement loan?

One major difference between both of these products is – a home equity loan is a secured loan while a home improvement loan is an unsecured loan.

Home Equity Loan Home Improvement Loan
Secured against your home Unsecured personal loan
The repayment period may go up to 30 years Maximum repayment period of 7 years
Your home is at risk if you default Your credit score is at risk if you default
You will pay less interest overall The interest that you pay may be high

Are home equity loans a good idea for home improvement?

  • The answer to this question is – it depends. If you are considering a major home improvement and you are sure that you can afford all the repayments on time and in full – then a home equity loan will be an attractive financing option for you.
  • The only thing you have to take care of is – repayments. If you default at the repayments, you are putting your home at risk. Also, note that every time you take out money of your equity, the time taken to pay off your debt will also increase.
  • If you are eyeing on minor home improvements or you are not willing to put your home at risk – you can rely on a home improvement loan. As the loan is unsecured, your property will not be at stake even if you fall behind on the repayments.

Does a home equity loan affect your credit score?

  • Yes. A home equity loan can have an impact on your credit score. Your every financial move is recorded on your credit report and using these parameters, your credit score is calculated. So, if you are regular with your repayments – your credit score will improve. Similarly, if you miss a repayment or stop making the payments altogether, your credit score will go down.

Learn how you can maintain your credit score.

What are the similarities in a home equity loan and home improvement loan?

  • After your application is approved, either for a home equity loan or a home improvement loan – they function in the same way. You will receive the loan amount in your bank account, and you have to pay back the lender every month. Interest rate is applied to both the financing options. And both of them are a fixed interest rate loan. That means the interest rate will remain the same throughout the loan duration. There will be no change in the interest that you are supposed to pay till the loan completion period.

Can I take a home equity loan if I have paid off my house already?

  • Yes. Even if you have paid off your house, you can still take out a home equity loan. If you are considering to use the amount for consolidating debts, making home improvements, – a home equity loan is a good option. Rather than using a credit card for making home improvements, you should use a home equity loan as the overall rate of interest will be low comparatively.
  • The amount that you can borrow depends on a range of factors – debt-to-income ratio, credit history, and the loan duration you have applied for.
  • Before applying for any form of credit, it is better to check your credit report first. If you have a low score, the interest rate for the loan offers you may receive will be high. Scan your report and if you find any errors, get it rectified from any of the three Credit Reference Agencies (CRAs). And most importantly, compare multiple offers before settling down for one option.
  • LoanTube offers you a “free of cost” platform to compare multiple loan offers from different lenders on a real-time basis. That means our lenders provide a rate-lock guarantee after assessing your loan application and credit report.

Compare various loan offers from LoanTube to determine which one best suits your needs out of the many possibilities available.

Representative 79.5% APR

Warning: Late repayment can cause you serious money problems. For more information, go to moneyhelper.org.uk

Credit subject to status & affordability assessment by Lenders.

LoanTube is a credit broker and not a lender.

Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on any debt secured against it.

Other Resources

Representative APR Example

The rate you are offered will depend on your individual circumstances.

Representative APR Example: On an assumed loan amount of £1,000 over 18 months. Rate of interest 59.97% per annum (fixed). Representative 79.5% APR. Total amount payable £1,554.10 of which £554.10 is interest. 17 equal monthly repayments of £86.09, and the final month’s payment of £90.57.

Some of the offered loans might be classed as High Cost Short Term Loans. APR rate starts from 18.22%. The maximum APR rate is 1721%, but you will get a personalised rate tailored to you. The minimum repayment term is 3 months, the maximum repayment term is 7 years. The minimum loan amount is £250 and the maximum loan amount is £35000.

Warning: Late repayment can cause you serious money problems. For more information, go to moneyhelper.org.uk

Credit subject to status & affordability assessment by Lenders.

LoanTube is a credit broker and not a lender.

Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on any debt secured against it.

Not all borrowers will qualify for a loan. The operator of this website does not engage in any direct consumer lending, we simply provide you a FREE loan brokering service. This means LoanTube does not charge customers a fee for using its introducer services, but it receives a commission from lenders or other brokers if a customer enters into a consumer credit agreement with them following an introduction by LoanTube.

By continuing to use our website, you agree to accept our cookies policy
X
Google