Home improvement loans

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What is a home improvement loan? 

A home improvement loan, or home renovation loan, allows you to borrow a set amount to fund renovations to your property. This typically comes in the form of an unsecured personal loan, but you can also secure the loan against your home, which usually allows you to borrow larger amounts.

Home improvement loans offer the following benefits:

  • Quick access to your money. Once approved, you could have the money for your renovation project in your bank account within days – in some cases, just 24 hours.
  • A loan with fixed interest rates helps you to budget for your monthly repayments.
  • You can choose the period over which you pay back a home improvement loan. The repayment period can range from one to 10 years.
  • You can choose the amount you want to borrow. But always be sure that you can afford the monthly repayments.
  • You can choose how you spend your money. In most cases, you don’t have to specify what you want the money for. For example, if you end up spending less on a home improvement project, you might want to use the remainder of the loan money for something else. 

Home improvements, such as a new kitchen, bathroom or adding an extension, not only add space for your growing family but also significant value to your property if you decide to sell it in the future.

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What are the different types of loan for home improvement?

There are two main types of home improvement loan to consider:

Unsecured home improvement loan

Also known as an unsecured personal loan, this type of loan allows you to borrow without putting up an asset, like your car or house, as security.

As approval is based on your ability to pay back the loan, lenders will want to check that you have a good credit history. They may also want to confirm your employment status. A secure job will reassure lenders that you have the means to pay back the money. 

If you’re planning to spend around £1,000 to £25,000 on a smaller project, such as updating your kitchen, an unsecured loan might be a good way to get the money you need. However, there’s a few things to consider:

  • Although you won’t risk losing your house with an unsecured loan, failure to make payments could bring a County Court Judgment (CCJ) against you and seriously damage your credit rating.
  • As there’s no need for collateral as security, you might not be able to borrow as much as you would with a secured loan. 

Secured home improvement loan

Also known as a homeowner or home equity loan, this type of loan allows you to borrow a larger amount of money using the equity or the value of your home as security. Depending on your credit history and financial situation, you might be able to borrow up to £100,000 or even more with a secured home improvement loan.

This type of loan is suitable for major renovation projects. Interest rates are often lower and fixed over a longer period, which helps with budgeting.

However, with a secured loan you need to consider that your house could be repossessed if you fall behind on repayments. 

What should I consider when choosing a home improvement loan? 

If you’re not sure which type of loan is right for you, it’s worth paying attention to:

  • The interest rate: the lower the interest rate, the better. With a fixed rate your payments will stay the same until the loan is paid off. But some loans can have a variable interest rate, so the monthly payments could go up or down. And if you also have a variable rate mortgage, you could get hit twice if rates go up.
  • Any fees: depending on the type of loan you opt for, you may have to pay fees as well as interest.
  • Your monthly payments: homeowner loans typically offer longer repayment terms than unsecured personal loans, which can mean lower monthly repayments. But because you’re paying back the loan over a longer period, you may pay more in interest overall. As the cost of living increases, you also need to be sure that you can keep up the regular payments as your other bills eat up more of your income.
  • Your credit rating: if you’re a homeowner with a less-than-perfect credit history, you’re more likely to be approved for a secured loan than an unsecured loan because your house can be used as security.
  • Early repayment penalties: some lenders will charge you for paying off the loan early, so make sure you read the small print.

How can I find a home improvement loan? 

The good news is that it’s easy to compare home improvement loans with us. Just answer a few questions and we’ll show you which loans you’ll be eligible for without impacting your credit score.

We let you look at the options for both unsecured personal loans and secured homeowner loans. You can search based on:

  • How much you want to borrow  
  • How long you want to repay for.
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Frequently asked questions

What are the disadvantages of a home improvement loan?

The disadvantages include:

  • Penalties – if you don’t make the repayments on time, you’re likely to be charged a penalty.
  • Home repossession – if you secure your loan against your property and fail to keep up with your repayments, the lender can repossess your home and sell it to recover the debt.
  • Interest rates – are you comfortable with the amount you’ll have to pay each month? Unsecured loans typically come with higher rates of interest than secured loans.
  • Home valuation – you might not improve the value of your home equal to the amount you’ve spent on your improvements.

Can I add a home improvement loan on to my mortgage?

Yes, it’s possible to borrow more on your mortgage to fund home improvements if you have equity in your home. You can:

  • Take out a further advance if your lender allows it. This simply means borrowing more on your mortgage, which will typically be charged at a different and potentially higher interest rate to your main mortgage. 
  • Take out a second charge mortgage. This means getting another mortgage on your home in addition to the one you already have.
  • Remortgage, which involves switching to a new deal and/or lender.

Borrowing more is likely to increase your monthly mortgage payments and/or you’ll need to pay your mortgage for longer. You’ll typically have to pay mortgage arrangement fees, so cost these in too.

See more on funding home improvements by remortgaging.

What is the difference between a home equity loan and a home improvement loan?

A home equity loan allows you to 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 improvement loan usually refers to an unsecured personal loan.

Can I get a joint home improvement loan?

If you apply for a joint home improvement loan, you’ll both be subject to the standard credit checks, so it’s important to know you each have a good credit rating. As a pair, you may be eligible to borrow a larger amount.

Can I get a home improvement loan with a bad credit score?

Having a poor credit history doesn’t necessarily mean you can’t get a loan, but you’ll probably have less choice and face higher interest rates. Get tips on improving your credit score.

What alternatives are there to a home improvement loan?

There’s a few alternatives to a home improvement loan:

  • If you only need to borrow a small amount of money for a very short time, consider using your interest-free overdraft, if you have one. If not, it could be worth looking at current accounts that offer this facility.
  • Credit cards with 0% interest on purchases could be worth considering if you need to buy something specific. If you pay back what you owe within the interest-free period (and make at least the minimum monthly payments on time), the credit won’t cost you anything.
  • If you need a larger sum of money, a personal loan could be the best answer. You can usually borrow between £1,000 and £25,000.