The amount that you need to borrow for your home improvement will depend on the size of the job, and also the amount that you can afford to pay back in interest. The other essential factor that will determine the size of the loan is the timescale that you and the lender are able to agree on for you to make repayments. The first thing for you to do is to estimate how much the job will cost and then determine the amount you need to borrow.
Depending on how large, and how expensive, your home improvement task is, it may not even be the case that you need to take out a home improvement loan. A comparatively small task, such as redecorating or getting a new shower fitted, is likely to cost less than £1000, in which case you may well be better seeking alternative means of raising the money. A credit card or overdraft extension may provide a slightly cheaper means, in the long term at least, of borrowing money for this kind of size of home improvement job.
Unsecured personal loans – APRs and terms
If your home improvements are likely to cost in the region of £5000 to £15,000, then your best course of action may be to take out a personal unsecured loan. Although these have a higher rate of interest than secured loans, there is less at stake in that you are not using your property as collateral, thereby potentially putting your home at risk.
At present, the very lowest that lenders are offering unsecured loans have APRs as little as 4.8%, to be paid back within a period of one to five years. This would mean that if you borrowed £8000 on a two-year term, you would need to pay back £349.66 each month, and you would end up paying £8390.68 in total. The least amount you would be able to borrow at this particular annual percentage rate is £7000, and the most is around £13,000.
If you need to borrow a larger amount than this, say between £15,000 and £25,000 you may still be able to get an unsecured loan, but at higher rates of interest. A loan that is repaid over seven years can be got for around 7.8% APR. This would mean that a £20,000 loan would entail monthly repayments of £307.10, and a final cost of £25,796.40.
Secured loans – APRs and terms
This type of loan is suited for anyone who needs to borrow a much larger amount for their home improvements. Typically APRs are offered between 5% and 8% on loans from around £20,000 and going up to as high as £200,000, which you would most likely be expected to pay back within 10 or 15 years.
A £40,000 secured loan over 10 years with an APR of 6.7% would involve monthly repayments of £384.26, and you would be paying back £46,111.20 in total. Whereas a £60,000 secured loan over 15 years with an APR of 7.5% would result in monthly repayments of £602.51 and a total of £108,451.80.