Loans for Home Improvement – What You Need to Know First
If you are a property owner, your goal is to add value to your home. The value can come in the form of improving your quality of life by enhancing your space or extending your home to accommodate a growing family. Every homeowner or family has varying motivation for undergoing home improvement projects. Whatever your reason is, there is a significant cost that is entailed when you undergo this project. It is also not a smart idea to use up all of your savings to cover the cost of renovation.
Loans for home improvement are created for this purpose. It enables you to get access to funds that can be utilised to finance your home improvement project – big or small. When done right, home improvement projects could potentially add tens of thousands to the overall value of your property. This is vital if you are thinking about reselling the home in the future. If not, it can boost the structural integrity of the home and make it a more livable space for your family.
Loans for Home Improvement 101
A home improvement loan is essentially a type of loan product that is designed primarily for use on home improvement projects. The borrower will be using the money to do upgrades on their home and it will be subject to agreed loan terms with your bank or lender.
You should not confuse loans for home improvement with a home equity line of credit, or a home refinance loan. These are different types of products and the amount of money you can access can vary significantly, too. Unlike loans that are designed for home improvement, the aforementioned loan products are also more difficult to obtain.
Loans for home improvements can be characterised as the following:
- • The total amount of money you can borrow with loans for home improvement can be as small as £400 to as much as £80,000. It varies based on the type of project you wish to undertake and your credit score (or overall financial capacity to pay).
- • The interest rates placed on your loan will also vary significantly. Some borrowers can get an interest rate of 3% while others have to pay 18% in interest rate. Factors such as your credit score and history are evaluated upon application. If you want to get a lower interest rate, make sure to fix your credit score first.
- • The payback timetable for this type of loan is also going to differ from one case to another. Some loans can be paid back in a short period such as one year. Meanwhile, there are others that come with a longer term such as 7 years.
- • Once approved, home improvement loans can be vetted quickly. In most cases, your money is deposited to your account within 1 or 2 days. This range can vary from one lender to another, though. You can streamline your application process by making sure you have submitted all of the required documents.
Steps to obtain a home improvement loan
The process involved when obtaining loans for home improvement is pretty straightforward. But even though the steps are easy to follow, you will need to do some homework first. The following steps are involved when you want to obtain this type of loan.
Step 1: Specify your purpose for the loan.
There are different types of home improvements that you can do to your existing home. When you apply for a loan, it would boost your application if you are able to specify the type of project you wish to undertake. For example, you need to specify if you are using that to install a new kitchen, build a deck, undergo repairs due to flooding, or furnish your basement.
The reason why you need to be specific is that it is easier for the lender or bank to assess the associated costs for the project. At the same time, the lender will be able to evaluate the type of project and determine if the amount is used to increase the home’s value. After all, you need to understand that your lender will also be invested in the growth of your home value, especially if you use your home as the collateral for the loan. Seeing a good and credible use of the loan will improve your chances of gaining approval.
Step 2: Be specific about the amount you want to borrow.
In addition to specifying what type of home improvement project you want to undergo, you must also specify the amount you need to borrow. Before you submit your application, it is important that you talk to a contractor about the plan for your project. They can provide you with an accurate estimation of the project cost. You will use that estimate as a basis for sending your application. By doing this step, you will have shown the lender that you have done your homework so you can give them a ballpark idea of the cash amount you need to cover the home improvement.
Why do lenders prefer this approach? Because it saves them time and will enable them to evaluate if the amount you are asking for is equivalent to the amount that you actually need to cover the project.
Step 3: Check your credit score.
The next step in obtaining loans for home improvement is to assess your credit score. Lenders will check the borrower’s credit score to determine their financial health. This is true not just for home improvement loans but for any type of loan. It is your responsibility to check your credit score before you apply for a loan to determine if you will qualify. Most lenders will approve those with a credit score of over 660. But you can also find lenders who are willing to work with those with a low credit score.
When you check your credit score, use this opportunity to evaluate your credit report for any mistakes or discrepancies. Any negative or wrong information on your credit report could have a significant impact on your score. It can also have a negative impact on your chances of getting approved for the loan. Make sure you pay it due diligence.
Step 4: Check your home equity.
One of the things that lenders evaluate when you apply for a home improvement loan is the value of your property (as expressed in your home equity). This refers to the amount of money you could make on your property if you choose to sell it today. This is vital information that you can leverage when applying for a loan. Make sure your potential lender knows about this information, too.
Step 5: Evaluate if you really need a home improvement loan.
Make sure to consider other alternatives before you take the leap. Depending on the size of your project, look at other options such as your savings or credit card (low interest ones) as an alternative. You have to think about the repayment obligations that come with taking out loans for home improvement. Make sure you are financially capable to handle that.
Choosing where to get your home improvement loan
Looking for a lender who will provide you with a home improvement loan entails more than just looking at the interest rate. While the ideal scenario is to find lenders that offer low interest rates, it is important to consider other factors as well.
The first step is to do a comparison of various lenders in your area. If possible, you can ask three or more lenders for a quote so you can assess the interest rates and other terms that come with the loan. By obtaining this information, you can decide what would be the right fit for your budget and your financial health. Do note that most of the quotes provided are for a specific credit score so make sure you take your own score into account when doing your evaluation.
It is also a good time to compute how much you can realistically afford. You need to take an audit of your finances to determine if you are capable of paying off your loan obligations. Otherwise, you would not want to risk losing your property if you can no longer meet repayments.
Ask for recommendations from your friends or family. Get in touch with the people who have gone through this process before. They can also provide insight as to the processes involved and qualifications to improve your chances of approval.
Knowing when to take out loan for home improvement
Finance experts advise to pay for cash when undergoing home improvements. But if you can’t, loans are the next best option.
You may apply for a loan for home improvement if you believe that the project is going to boost the value of your home. Make sure that the projected increase in value is higher than the cost of renovating. This is an important thing to keep in mind for homeowners who intend to sell their property in the future. According to experts, renovations in the kitchen and bathroom are the ones that will add significant value to your home.
Another reason to take out a loan is to make home improvements that will augment any repair work that needs to be done. Undergoing repairs can be costly but the end result will improve the structural integrity of your home. The best kind of home repairs that will be covered during renovation are roofing, plumbing, and siding repairs.
Lastly, you can take out a loan for home improvement if your finances are in order. Home improvement loans require you to meet payment obligations over a certain period of time. If your financial situation is not good right now, it will only get worse once you have a loan to pay for. Fix your credit score and pay off any existing debts before you take the leap. If you do these, you can even get favorable rates on your new loan.
Are you looking for loans for home improvement? At Money Pig, we can help bridge you to lenders who can provide this type of loan to cover the cost of home repairs or home improvements. Whatever project you wish to undergo, you can depend on us to help you find the most trusted lenders in the UK to finance the project. We will save you time and ensure that you can get faster approval on your loan!
Frequently Asked Questions on Loans for Home Improvement
These are the most commonly asked questions for individuals who are in search of loans for home improvements. Check out below if you can get the information you are looking for.
- How do loans for home improvement work?
- When is a home improvement loan a good idea?
- How hard is it to get a home improvement loan?
- Can you get a home improvement loan with bad credit?
- What type of loan works best for financing home improvements?
- How do you get a loan for home improvement?
- What is the difference between a home equity loan and a home improvement loan?
- Are home improvement loans easy to get?
- What is the interest rate for a home improvement loan?
- Can you write off interest on a home improvement loan?
- Can I get a home improvement loan with no equity?
- Are loans for home improvement worth it?
- Where can I get a home improvement loan with bad credit?
- Can you use a home improvement loan for anything?
- Should you use a personal loan for home improvement?
- How fast can I get a home improvement loan?
- How will I get the money for loans for home improvement?
- How can Money Pig help with obtaining loans for home improvement?
A home improvement loan is a specific type of loan product that is designed to be used for renovating or improving your home. The amount of money you borrow will depend on the extent of repair or renovation to be done. The project can be big or small; however, the goal is to boost your home value and make it a more desirable place to live in for your family.
A home improvement loan is a good idea if you think you can afford the repayment obligations for the loan. It is also a smart choice when you can improve the overall value of your home by undergoing this project.
It varies from one lender to another. Some lenders are strict about imposing the credit score requirement such that you need to have a credit score of 620 or higher to qualify. Make sure to shop around to determine if you qualify, if you have a credit score that is lower than the one above.
Yes. There are plenty of lenders that specialise on offering loans for people with bad credit. Make sure you look specifically for them to improve your chances of getting approved. However, you can expect to pay a higher interest rate on your loan if you have a bad credit.
A home improvement loan is the primary option for anyone looking to finance their home improvement project. If this is not available from any lender in your area, another option is to take out a personal loan. It works just like any unsecured personal loan wherein you will be evaluated (along with your interest rate) based on creditworthiness. Typically, it will have a fixed interest rate with a scheduled monthly payment.
The main advantage of opting for a personal loan is that you don’t need equity. You can also borrow small amounts, especially if you are undergoing a small home improvement project only. The only downside with personal loans for home improvement is that the repayment period is typically shorter.
To get a loan for home improvement, you must first search for lenders in your area that offers this kind of loan. If not, check if there are options for personal loans or home equity loans. You can check the lender’s list of requirements and comply with that upon submission of your application. If you meet the requirements and have satisfied the requirements, then you can get the fund you need to start your project.
Both types of loans function similarly once you have been approved for the loan. You will be provided the approved loan amount and you must make monthly payments to the lender based on the approved interest rate. The only difference lies in the possible amount that you can get from the loan as the home equity loan is based on the current market value of your home while home improvement loans are based on your credit score.
It depends on your credit score and overall creditworthiness. Lenders evaluate a number of factors to determine if an applicant is qualified or not. If you have a credit score of 620 or more, then you will find that getting approved for a loan is easy. If not, then you would have to get a co-signer for the loan or you have to pay higher interest rate to qualify.
The interest rate on home improvement loans will vary from one person to another (according to your credit score and other factors). The range of interest rate will start from 6% to as high as 36%. The rate you receive will be based on your credit score. If you want to keep your interest rate low, make sure you work towards a high credit score.
Yes it is possible if you are looking to claim your home equity loan interest deduction. However, you must be able to prove that you will use the money for home improvement or renovations. If you use it towards personal expenses, then you cannot take the interest deduction.
Yes. One of the options available is to take out personal loans for home improvement. This is a common choice for borrowers who have no equity or don’t qualify for home equity loans. You can also research other alternatives when it comes to obtaining loans for home improvement.
Yes. It can be worth it if you know how to use the money well in order to take on home improvements. With proper planning, you can boost the market value of your home. This will help to increase your home equity or enable you to sell the home at a higher price, should you decide to do so later.
There are many lenders in the UK who are able to provide loans for home improvement even for borrowers with bad credit. Make sure to do a comparison of local and online lenders in the UK. Choose only reputable lenders as there are many who will try to capitalise on those with poor credit. The more you conduct research, the better able you are to generate an overview of prevailing interest rates on bad credit loans.
No. When you apply for a loan and state to the lender that you will be using it towards home improvement projects, you need to do so. Otherwise, you will not be approved for the loan if you use it on personal expenses. On the flip side, you can use personal loans to cover the expenses of home improvement.
Yes. If you cannot find or qualify for other types of loans for home improvement, a personal loan is a good option. There are many pro’s associated with personal loans such as getting a lower interest rate compared to other types of loans. Another advantage is that you can get access to the funds pretty quickly.
The process involved when applying for personal loans is also less stringent. And there are no upfront-fees associated with personal loans. Finally, personal loans are a type of unsecured loan so there is no need for collateral.
Loans for home improvements can be accessed pretty quickly, especially if you are already approved for the loan. It depends on your lender but some borrowers can get it in hours, while others can get their funds in 1 or 2 days.
It depends on the method of deposit that you agreed on with your lender. However, most lenders in the UK are able to deposit the approved amount to your bank account as soon as you get the approval.
If you are looking for loans for home improvement, Money Pig can help you identify the best lenders in the UK that can provide the funds you need. We only work with trusted and reputable lenders so you can ensure that you are dealing with legitimate lenders. We match your needs and qualifications with the right lender to get a higher approval rating on your loan application. It is our commitment to bridge lenders to consumers to streamline the loan application process.
Get started by providing us your personal and financial information. We will use that to match with our database of UK lenders to satisfy your requirement.