Should I Pay for my Extension with Credit or a Personal Loan?

If the time has come for you to build that extension you've been putting off, it might be the largest financial commitment you've made since purchasing the house. There are two basic ways to quickly conjure up money. The first is to apply for a credit card. The second is to take out a personal loan. Either route should be precipitated by a close analysis of your needs and a thorough shop around the market to find the right product.

Big banks like Santander offer loans (click the link to view the options on personal loans from Santander ) which have to be paid back - with interest - over a predetermined repayment period. Secured loans are essentially a second mortgage, as they are secured against the value of your house. These can be very attractive in terms of interest rates, but not to be defaulted on or you may lose your home. Unsecured loans cost more, but with that increased premium comes peace of mind.

Presenting less of a risk to the lender does have an advantage in that it allows for much larger sums to be borrowed, so if your extension is going to cost a lot of cash, a secured loan may be the only way. If the extension adds considerable value to the property, it will end up as a worthwhile investment. Generally speaking, an unsecured personal loan will range from a thousand pounds upward, while loans over 25k are likely to require property secured against them.

Credit cards, with their borrowing flexibility, are more appropriate if you are, for instance, having a small wall built on a driveway or some simple repaving done. If cash flow is not enough to cover small building costs, it often makes more sense to use a credit card to pay for the work, especially if you are working from a rough estimate – if an 800 pound job ends up costing 1100, your credit card with its 5 grand limit will cover it either way, without you having to commit to paying interest on a full five thousand.

If you have a specific goal in mind like a conservatory or spare bedroom extension, a personal loan is likely to be for you. Before undertaking a large-scale property extension or borrowing any money for one, be sure to look into any legal requirements for building on the land – visit the government's Planning Portal for building regulatory information.