Home improvement loans
Home improvement loans
- Choose how long you want to borrow for
- Search for the right home improvement loan, before you apply
- Comparing with us won’t affect your credit rating
What is a home improvement loan?
A home improvement loan can give you the cash to refurbish or renovate your property and could help boost its value.
This type of borrowing is usually an unsecured personal loan or, in some cases, a secured loan instead. You can typically take out more with a secured loan, which is useful for bigger projects, but you’ll have to use your home as security.
How do home renovation loans work?
1. Compare home renovation loan deals
Check your eligibility to see which home improvement loans you’re likely to be accepted for, without affecting your credit score. Then compare interest rates, monthly payments, any fees and the cost of the loan overall.
2. Apply for your loan
If your application is approved, the money could be in your account within days (or possibly within hours on the same day if you’re an existing customer).
3. Start your home improvement
Use the lump sum to pay for renovation projects, which could potentially increase your property’s value.
4. Repay the loan
Pay back the loan in fixed monthly repayments. You can choose to pay off your loan early but you might face an early repayment charge.
Use our home improvement loan calculator
Use our loan calculator to get a rough idea of how much you could afford to borrow and how much it will cost you each month.
You can change the variables in the calculator, such as the loan amount, length of loan and interest rate, to see their impact on the size of the monthly payment and overall cost.
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What are the different types of home refurbishment loan?
There are two main types of home improvement loan to consider: unsecured or secured. Here’s how they work.
Unsecured home improvement loan
If you’re thinking of this kind of loan to help pay for your home redesign:
- You’ll need a good credit history: approval is based on your ability to pay back the loan. Lenders will check your credit history to see how you’ve managed money in the past. You may also need to show you have a regular income.
- It’s ideal for smaller projects: every project (and property) is different, but this rule generally applies if you’re planning to spend up to £50,000. For example, you could be overhauling your kitchen, installing a new bathroom or making your home more energy efficient.
- You can borrow without putting up any security: there’s no need to put up an asset, such as your home itself, as security in case you can’t repay.
Secured home improvement loan
This type of loan, also known as a homeowner or home equity loan, could be right for you if it fits your circumstances:
- Suitable for major building projects: depending on your credit history and financial situation, you might be able to borrow up to £150,000.
- Lower interest rates: combined with longer loan terms, this could make monthly payments cheaper. But as you’re paying back the loan over a longer term, you’ll pay more in interest overall.
- Uses your property as security: your home could be repossessed if you fall behind on the repayments.
What are the pros and cons of a loan for home improvement?
Advantages:
Here’s how you could benefit from a loan to renovate your home:
- Get started sooner – you won’t need to save up to get the green light for your redesign project. You’ll be good to go as soon as your builder is free to begin.
- Quick access to your money – approval for an unsecured loan can be quick, although secured loans typically take a little longer. You could have the money in your bank account within days; in some cases, just 24 hours.
- Easier to budget – a loan with a fixed monthly repayment can help you to budget.
- Choose how long you borrow for – repayment for a home improvement loan can range from one to 10 years.
- Decide on your loan size – always be sure you can afford the monthly repayments.
- Spend your money as you like – in most cases, you don’t have to specify what you want the money for. If your project comes in under budget, you could use the rest of the loan on something else or put it toward repaying the loan.
- Add space and value – a loan to renovate your home allows you to add space for a growing family. It could also potentially boost your property’s value.
Disadvantages:
Here’s what you need to watch out for if you take out a home renovation loan:
- Penalties – you could damage your credit score if you don’t pay back your loan on time.
- Home repossession – if you secure the loan against your home and fail to keep up with the repayments, the lender can repossess your home (and sell it to recover the debt).
- Higher costs – you’ll have to pay interest on what you borrow, so your project could end up costing you more than if you wait and save up.
- Interest rates – unsecured loans typically come with higher rates of interest than secured loans.
- Poor credit history? It could be expensive to borrow – if you’re approved for a loan, you’re likely to be offered a higher rate of interest.
- Home valuation – you might not improve the value of your home by as much as the amount you spend on it.
What our expert says...
“The best way to borrow for home improvements isn’t the same for everyone. It will depend on how much you want to borrow and for how long. Lenders will consider your financial situation, your credit history and what’s affordable for you. It’s a good idea to compare loans to find a competitive interest rate before you commit.”
- The Editorial Team, Experts in personal finance, insurance and utilities
What should I consider when choosing a home improvement loan?
Before deciding on the best home improvement loan for you, consider:
- How much you need to borrow: the bigger the loan, the more you’ll pay in interest. Only borrow what you need.
- The interest rate: with a fixed interest rate, your payments will stay the same until the loan is paid off. With a variable rate, your monthly payments could go up or down.
- How long you borrow for: pick a longer repayment period and you’ll reduce the size of your monthly repayments. However, because you’re paying back the loan over a longer period, you may pay more in interest overall. The shorter the loan term, the less interest you’ll pay overall. But your monthly repayments will be higher, so you’ll need to be sure you can afford them for the duration of the loan.
- Your credit score: if you’re a homeowner with a less-than-perfect credit history, a secured loan might allow you to borrow more at a lower interest rate. But be aware that your home could be at risk if you can’t meet the repayments.
How can I find a home improvement loan?
It’s easy to compare home improvement loans with us. Answer a few questions and we’ll show you which loans you’re likely to be accepted for, without affecting your credit score.
You can compare unsecured personal loans and secured homeowner loans, based on:
- How much you want to borrow
- How long you want to repay for.
Compare the Market Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility.
What are the alternatives to a home improvement loan?
It could be worth exploring these alternatives, depending on how much you want to borrow and for how long.
Credit cards
If you’re looking to fund a smaller project, a 0% purchase credit card could be an option. As long as you pay back what you owe within the interest-free period, and make the minimum monthly payments, the credit won’t cost you anything.
Remortgaging
Depending on how much equity you have in your home, you may be able to remortgage for a larger amount.
For example, if your home is worth £250,000 and your outstanding mortgage is £150,000, you might be able to remortgage for £175,000. You could then use the additional £25,000 for renovations.
As you’re borrowing more, your monthly payments are likely to rise so check that it’s affordable. And if you’re extending your mortgage term, you may pay more in interest overall.
You’ll also face remortgage fees. And double-check for any early repayment charges on your existing mortgage.
A second mortgage on your home
Some lenders will allow you to take out a second mortgage on your home. This isn’t an increase on your existing mortgage; it’s a new loan.
Just like any other mortgage, you’ll need to consider additional costs, such as surveyor’s fees and arrangement fees.
Saving up
If you can, you could save up for all or part of the cost of the improvements. Or perhaps you can stage the work into more affordable chunks rather than doing it all at once.
Frequently asked questions
Can I add a home improvement loan to my mortgage?
Yes, by remortgaging, you can apply to increase your mortgage and use the extra money to pay for the projects. How much extra you can borrow will depend on the amount of equity you have in your home.
If you decide to remortgage to fund home improvements, be aware that borrowing more is likely to increase your monthly mortgage repayments. You may also need to repay your mortgage for longer. You’ll also have to pay remortgaging fees.
What’s the difference between a home equity loan and a home improvement loan?
A home equity loan, or homeowner loan, is secured against your home. A home improvement loan is typically unsecured. This means it’s approved on your perceived ability to pay back the loan, based on your credit history and income.
With a home equity loan, you can borrow against the equity you have in your home. For example, if your home is valued at £500,000 and you have £100,000 outstanding on your mortgage, the equity is £400,000.
A home equity loan may allow you to borrow more than you could with an unsecured home improvement loan. But it’s important to remember that you could lose your home if you fail to keep up with the repayments.
Can I get a joint home improvement loan?
Yes, you can apply for a joint home improvement loan. You’ll both be subject to the standard credit checks, so it’s important that you each have a good credit rating.
You may be eligible to borrow a larger amount with a joint home improvement loan.
Can I get a home improvement loan with a bad credit score?
It’s possible to get a home improvement loan with a poor credit history, but you’ll probably have less choice and face higher interest rates.
Depending on your credit rating, the lender may also want you to use your home as security for the loan. If you can’t make the loan repayments, you risk losing your home.
Before you apply for a loan, it’s a good idea to make sure your credit score is as healthy as possible. Get tips on improving your credit score.
What should I do if I’m struggling to make my loan repayments?
If you’re struggling to make your repayments on time, speak to your lender as soon as possible. They may be able to extend your loan to reduce your monthly payments or give you a payment holiday to help you catch your breath.
If you’re struggling with debt, you’re not alone. You can get free advice on managing your finances from services and charities including Citizen’s Advice, StepChange and the National Debtline.
What is a renovation mortgage?
A renovation mortgage could help you to buy a property that needs fixing up and finance the necessary renovations.
Some high-street lenders may not offer standard mortgages for properties that are deemed derelict or uninhabitable. This is often when they’re without a bathroom or kitchen, and have no running water. In that case, you’ll need a renovation mortgage.
Lenders who provide renovation mortgages typically base the loan amount on how much the property is expected to be worth after renovation. But you’ll need to be sure the property is worth the money you’ll have to put in to make it a home.
You can’t compare renovation mortgages with Compare the Market.
