home improvement loans

Due to the increasing costs of moving house, and the current sluggish nature of the housing market, many people are choosing to stay where they are and get a house extension, or undertake a major renovation project, rather than move elsewhere. The next question is how to pay for it, and for many people the answer to that question is to get a home improvement loan.

Taking out a loan to fund a home improvement project is a major decision that is likely to have a significant impact on your personal finances for the years ahead. It is not something that should be entered into without having first explored the alternatives.

The alternatives to home improvement loans

savingsUsing your savings to pay for a home improvement project is ideal in some respects, not least because it means you will not have to enter into any kind of debt. Depending on how much money you have at your disposal, a house extension or loft conversion can be seen as a good use of your savings, in that they can be seen to work as an investment, due to the fact that will likely add to the value of your property. However, using so much of your savings at one time can be very risky, and should rates pick up in the future, you could miss out on future earnings provided by interest on your savings.

Remortgaging your property is another option that is explored by many people. If your home improvement project is likely to exceed £15,000, then it might also be worth considering a secured loan. As with a mortgage, your property is the collateral of a secured loan, and you will have longer to pay it back at interest rates that are lower than those of an unsecured loan.

If you are over 55 years of age, and you have paid off your mortgage, you may be able to release a significant sum of money from the value of your property. See our Equity Release section for more information.

The advantages of unsecured personal loans


If you are going to need less than £15,000, and you don’t want to have to tap into your savings, then your best course of action is likely to be an unsecured personal loan that is specifically tailored to cover a home improvement project.

The advantage that this type of loan has over a secured loan is that your property is not used as collateral, so that if you should fail to make repayments it is not your home that you are putting at direct risk.

Unsecured loans are usually offered at smaller amounts than secured loans (£15,000 is a typical maximum) and they have shorter periods for repayment (ten years max. is fairly standard). Consequently, the interest rates are higher for unsecured loans, but at least you will be paying it back more quickly, and the use you are putting it too will likely prove to be of financial benefit in the long term. This is an important thing to remember when taking out a home improvement loan: although there is always the expense incurred by the interest on the repayments, the project you are borrowing money to pay for may well end up in adding value to your property and making it more appealing to any future buyers.