Sometimes, the existing financial situation does not allow one to provide an upfront deposit to buy a new home. Moreover, with the economic frame and the number of unemployed and slashed pay rising, it becomes almost impossible to think about it even in 5 years.
Well, it is okay if you cannot buy a new home. You can update the existing one and increase the resale value. Moreover, home improvements like loft conversion, deck repair, and skylight installation can pay you more than you expected.
No, you do not need a good lump sum to begin the home renovation process. Instead, facilities like home improvement loans can help.
How does a home improvement loan work?
A home improvement loan helps you re-organise every aspect of your home. One gets a lump sum amount according to the improvement required. You can use the amount taken to improve the deck, paint the walls, convert the attic space into storage, etc. You can either choose a secured or unsecured loan depending on the finances. You must provide some home equity as collateral in security loans to qualify. If you do not want to risk it, unsecured home improvement loans may help.
It does not require any security. However, the interest rate and terms you get depend highly on your finances and credit score. Pick fixed or variable interest rates accordingly. Moreover, the loan tenure is about 7-15 years. You can choose the tenure according to your monthly savings and the amount to pay towards the loan repayment.
Is it worth to get a home improvement loan?
It may be worth taking loans for home improvements if you are planning some renovations but lack that much cash to finance them. Moreover, if some of your home aspects require immediate attention, waiting until you have money is not a choice. Alternatively, if it’s not urgent or you do plan to sell the house soon, you must save for improvements instead of taking a loan.
Moreover, identify the amount you can pay affordably to the lender. It would help you decide whether you should go for the loan. It is especially important if you opt for a secured loan. You may get it with a good credit score and finances. However, non-repayment may lead to asset seizure.
Thus, you must confirm if you can afford the loan and interest costs and pay in full later. If you can, then you may use it for your home renovations.
What aspects to look for while taking a loan for home improvement?
If you decide to go ahead with the loan, you must know some aspects. These parameters are critical to qualify for better rates for home improvement loans. Here are some key features of home improvement loans that may help you decide the right amount and terms. Moreover, the step-wise way will help you approach the loans correctly. Let’s begin:
1) Meet the Qualifying criteria
The eligibility criteria to get home renovation loans may differ slightly from lender to lender. However, some aspects remain the same. Check the general eligibility criteria :
- You must be above 21 years as a UK citizen
- Should possess a regular income of around £20000 to qualify for the loan
- You can be self-employed, retired or a tenant
- You must be on the electoral roll in the UK
- You must not share any bankruptcy or insolvency tag in the last 4 years
Moreover, every credit search gets recorded. It implies the lender conducts a hard credit check after the initial check to determine the affordability potential.
2) Check for low APR and interest rates
It is one of the most important parts of the home improvement loans. Whether you choose a secured or unsecured loan, compare APR and interest costs. Explore the best and most affordable interest rates for your needs.
It would help you qualify easily and save money. Moreover, remain aware of the repayment tenure you apply for. It also impacts the overall cost of the loan. With a longer repayment term, you pay more.
3) Fixed vs. variable interest-decide right
As mentioned above, you can apply for fixed or variable interest rates on the loans for home improvement. Fixed interest rates are ideal for individuals with unstable incomes. It helps them avoid any surprises with the economic change.
Alternatively, variable rates are for those with fixed income and want to benefit from the falling interest rates with a good economy. You may also pay the same if the economy remains unchanged. Interest rates imply low monthly repayments and savings. However, it is a matter of chance that the economy improves and the loan costs fall.
Moreover, try to clear existing debt and improve your credit history. It would help you get an affordable loan.
4) Identify the purpose
Yes, the name symbolises- you can use these loans for any home update. You can use the loan for the following purposes:
- Loft conversion
- Kitchen update
- Bathroom refinishing
- Extending bedroom space
- Creating a work-from-home setup
- Floor cleaning and tile replacement
- Tile refinishing
- Updating child’s study space
- Creating a small library
Identify the amount you have as savings. If it is minimal, the loans may help bridge the amount. For example, you need £20000 for bathroom refinishing. If you have £2,000 as savings after paying the liabilities, loan up £18000 to bridge the amount. You can opt for an unsecured loan for low-amount needs.
Just analyse the right amount to apply for. Borrowing a flexible amount is more helpful than a low amount. It would not meet your needs. For assistance, take the help of the loan provider.
5) Choose the right repayment terms
Identify the repayment term you are comfortable with. For this, analyse the loan costs, including interest costs, missed payment costs, loan processing fees, and closing costs. Analyse the monthly amount you can pay after meeting liabilities and saving some.
With a secured loan, you must choose a comfortable term by which you can clear the debt without hassle. You can choose up to 15 years.
However, lenders provide 30 days as a cooling period to pay off the secured loan. You must pay timely. It would help you avoid the unnecessary risk.
If you are short of a lump sum but facing a delay in salary, check loans with no guarantor from direct lenders nearby. It would help you close the loan without attracting massive penalties or missed payment fees. No guarantor facility allows one to manage and pay the secured loan independently.
Thus, you can navigate the rough home improvement loan easily this way. Be mindful of the financial vulnerabilities that may impact your payments. Keep borrowing amount flexible. It should not impact your finances and everyday requirements. It must meet your requirements without topping it up.
Mark Williams works as one of the Loan Advisors at a direct lender firm, PmLoansDay. He has been working with the lender for about 15 years. He has been known to facilitate his employer in remarkable ways from writing to consulting and whatnot. He is a professional who wants to explore more of the UK financial market, the loan products and how customer requirement changes with time.