Whether you want to refurbish a kitchen or mend a roof or extend a balcony, it requires an initial spending. Home improvement can be an expensive affair but still has the added advantage of increasing the total value of the house. A newly improved home feels great but also costs heavy on the pocket. To manage the financial outlay, one of the best ways is to choose a home improvement loan. Borrowing money for home improvements has the highest ratio of all borrowers in past three years.
Most of us do not have spare cash lying in our bank accounts and so, a loan seems to be the best alternative. Home improvement loans are divided into two broad categories – secured or unsecured.
An unsecured loan is a personal loan which allows you to borrow up to £25,000. This amount is given at a fixed rate of interest and paid over a fixed time period. It is such an easy method of managing money for property that more than 80% of personal loans are unsecured. The rate of interest will depend on the amount borrowed and the period for which it is borrowed. Beware of the low advertised rates as only 51% of the approved applicants get loans at this rate. So, the rest of them may get the loan at a higher interest.
One can also try the option of peer-to-peer lending which is similar to personal loan but can be borrowed at lower interest if one has a good credit history.
If the home enhancement project demands more money, then trying a secured loan is also a good idea. Secured loans are borrowed against a property, which can be repossessed by the loan provider in the event of failure of repayments. The interest rate of these loans will depend on the value of equity that is value of the property minus outstanding mortgage. It will also depend on the term period of loan, the longer the period the lesser would be the rate of interest.
Banks or loan providers will check your credit file to analyse your borrowing and repaying behaviour. Although in case of secured loan, they are not rigid about an excellent credit history. Even if your file shows traces of bad credit history, the lender will offer you loan as they have the building kept with them as a security. So, in case you cannot make repayments they can easily repossess the building and clear the losses.
Alternative to loans for home improvements:
0% interest credit cards: If you need smaller amount of money that is within £5,000 then choosing an interest free credit card would be a good deal. You can pay the amount at your own pace but the wisest way would be to make minimum monthly repayments to save your credit file from bad credit history. In case you cannot make repayments within the interest free time period then you can shift the balance to a balance transfer card and continue with your loan.
Overdrafts: You can ask for an authorised overdraft from your bank. But if you do not pay back the amount on time then be ready for the hefty charges of interest. Although, interest free overdrafts are generally available for only a few hundred pounds, this may not be suitable unless you are planning a small home improvement project.
Remortgage: For a larger loan, you can remortgage your property either with the same provider but on a different contract or with another loan provider. You will also get money at lower rates of interest but the final payment would be much higher than what you have borrowed. So, decide wisely.
After the home improvement, you must update your home insurance policy about the building and content if you have made some major structural changes. By making new furniture, the value of the contents of your home would increase. Therefore, you have to take care of many things along with home improvement. So, be prepared.
For home improvement loans comparison, just check our website freepricecompare.com or call us on 02034757476.
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