Home improvement loans

Guide to home improvement loans

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Thinking about renovating your property? Read our guide to find out more about home improvement loans

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Home improvement loans

Home improvements can be a great way to make a property a better place for you and your family to live, while increasing its value at the same time.

However, even though making improvements to your current house or flat often works out a lot cheaper than trading up to a larger home, many projects still require a significant financial outlay.

Whether you want a new kitchen, need to repair your roof or are planning an extension that will transform your home, you may need to borrow money to fund the work. A low-rate personal loan can be one of the best ways to do this.

This guide to home improvement loans should help you to decide whether it’s the right finance option for you.

Who takes out home improvement loans?

People who take out home improvement loans have the highest average income amongst all loan seekers, indicating that it’s the type of loan which attracts more affluent borrowers.

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MoneySuperMarket data, correct as of December 2017. 

In terms of age, home improvement is most popular amongst the 25-44 age band. There’s lots of different reasons why this might be the case, but it’s most likely because this is the age group who are most likely to be first-time buyers. 

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MoneySuperMarket data, correct as of December 2017.

Advantages of a home improvement loan

A personal loan offering the chance to borrow up to £15,000 over five years, for example, is a popular means of funding home improvements.

When you take out a personal loan, your payments are fixed – making it easier to budget – and you can generally choose to repay the amount borrowed over one to three or five years.

This means that if you can afford to repay the loan within a shorter timeframe it’ll cost you less in interest, but you also have the option of spreading the cost and reducing the size of the regular repayments if necessary.

Some loans also offer the flexibility of a payment holiday of say two or three months at the start of the agreement.

Disadvantages of a home improvement loan

The best loan rates are generally for borrowers looking to make repayments over three and five years, so you will often pay a higher interest rate to borrow over a shorter term.

But your credit score also has a significant impact both on the interest rate you will pay on a loan, and the amount you will be able to borrow.

Every time you apply for a personal loan, it leaves a record on your credit report. Too many applications over a short period of time will make you look much less attractive to lenders.

Any rejections for credit are also noted on your credit report, and will damage your credit score. That’s why it’s important to check your credit score before you apply for a personal loan; you’ll be able to see how strong or weak your score is and review your options accordingly.

And when you are ready to compare personal loans, make sure you use a service like MoneySuperMarket’s Eligibility Checker. This tool allows you to search personal loans and see which lenders are most likely to say yes to you. What’s more, it’s fast and easy to use and the search won’t leave any imprint on your credit report.

Alternatives to a home improvement loan

If you find that your credit score is preventing you being accepted for the best home improvement loans, one option is to consider a secured, or homeowner, loan that uses your home as security. But falling behind with the repayments on a loan of this kind will put your home at risk.

However, secured loans can be are a good choice for anyone planning a big project as they can be used to borrow up to £100,000 – depending on how much available equity you have in your home.

For smaller amounts, meanwhile, a 0% credit card is also an option – as long as you are disciplined enough to limit your spending and manage your repayment plan so that the balance is paid off by the time the interest-free period comes to an end.

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How much should I borrow for home improvement?

The amount you’ll need to borrow depends upon how costly the renovations to your home are likely to be. Younger people tend to borrow less for their home improvements, with an average loan amount of just £4,029. The highest average loan is taken out by 45-64 year olds, who borrow £9,005.

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MoneySuperMarket data, correct as of December 2017.

Finding the right home improvement loan

Personal loans deals, just like those available on other financial products such as credit cards and bank accounts, vary widely. But securing the best terms and lowest interest rate possible can make a massive difference to the amount you repay.

So it makes sense to shop around. You can do this quickly and easily by using the MoneySuperMarket loans channel to compare hundreds of different loans from a wide range of lenders.

The Help me find a loan tool can speed up the process of finding the best deals for your individual circumstances even more – all you have to do is enter a few details such as your name, your annual income and the amount you want to borrow.

MoneySuperMarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.

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