What types of loans are ideal for home renovation?

Whether you want to remodel your kitchen or bathroom, you cannot get it done on a paltry sum. As you do not act upon the overnight thought of doing up your house, you will have some savings to throw at the renovation. Since remodelling can burn a big hole in your budget, it is hard to be able to cover all the costs from your savings.

“There are several types of loans that you can turn to in order to refurbish your house, and each loan has its own upsides and downsides.” Experts recommend that you evaluate each loan carefully before you apply:

Personal loans

Personal loans can help you borrow without putting down collateral. It depends on a lender how much they would be willing to loan you. “For instance, while some lenders would be able to lend only £1,000, the others would be more generous by paying up to £2,500.”

However, you will need a stellar credit history if you need over £1,000. If you need money to fill a small shortage of cash in your savings, you can take out urgent loans for bad credit. You will get a quick supply of funds. You can borrow up to £20,000 for a renovation project if your credit score is high and your income source is good.

Pros

Cons

You can borrow as little as £1,000.

You will have difficulty borrowing a larger sum when your credit score is not stellar.

You will repay the debt in fixed instalments.

Interest rates can be very high.

No collateral and guarantor are required.

You will need a decent credit score to get the best deal despite a smaller sum.

 

Secured loans

Secured loans come in handy when you are not eligible for personal loans. A lot of reasons could get in your way, like a poor credit score, to say the least. Secured loans are ideal for a big renovation project. However, you will need to put down collateral.

Your house will serve the purpose of security. The size of these loans is usually larger than £5,000.

Pros

Cons

You can borrow a larger sum of money, up to £100,000.

The loan amount will be decided based on how much you own.

Interest rates will be lower as your house is secured.

You can lose your house if you fail to keep up with repayments.

You will have a longer repayment period that makes the loan more manageable.

No lender will let you borrow less than £5,000.

 

Guarantor loans

Guarantor loans are small loans that will help you carry out small home refurbishment projects. “These loans are aimed at those who need money but cannot qualify for a personal loan due to bad credit scores.”

The loan amount will not be too big, so these loans are ideal for small renovation projects. The guarantor must have a good credit score and can be your spouse or your friend. “Remember that your guarantor will be responsible for the payment of the loan when you make a default, and if it happens, it will have a damaging effect on the credit score of both of you.”

Pros

Cons

The chances of approval are high when you have a guarantor.

Lenders will put restrictions on the borrowing sum.

You do not need collateral, so there is no risk of losing anything in case of a default.

Finding a suitable guarantor may take time, so you will have to wait for a long time for money.

Interest rates will likely be lower.

A default will ruin your credit score of yours and your guarantor.

How to get the best home improvement loan deal

Home improvement loans with bad credit can cost you a lot of money. It makes sense to compare deals first. Here are some tips you should follow to get the best deal:

· Know how much money you need. Try to trim down the cost. It is not necessary to change the entire look of your house.

· Check out your affordability. Look over your credit score, outgoings, savings and incomings.

· Choose a lender who is reliable and offers home improvement loans at affordable interest rates.

· Check your eligibility before applying for the loan.

The final word

Home renovation projects are not extremely affordable to carry out. Despite having money in your savings, you will need to borrow money from direct lenders. Try to have a good credit score so you do not face any complications while getting approved.

Be careful with your research work as well. “Each lender charges different interest rates, so you should ensure that you choose a deal that is affordable for you.”

If you are confused, you can take the help of a financial consultant. They will help you choose the best loan option for your renovation project. 

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