Should I use a loan to pay for my home improvements?

 Before you remortgage your property for new home improvements, consider using a secured loan. Matt Tristram of Loans Warehouse spoke to Moneyfacts about the advantages of this type of borrowing.




Home improvements can quickly add up. Whether you are catching up with the lockdown trend of fitting in a home office, or if you are looking to improve the value of your property these costs can generally run into thousands of pounds.

With the increased cost of living making headlines every day, raising this type of disposable income to fit the bill upfront can be difficult. So, while you may consider remortgaging or unlocking equity to finance these renovations, you can always consider using a secured loan.

Benefits of a secured loan

There are many reasons to choose a secured loan to fund your home improvements, according to Matt Tristram, Co-Founder and Director of Loans Warehouse.

“Many customers have very attractive fixed rates at present and taking a further advance or remortgaging may lose that rate on the majority of their borrowing,” he said.

Tristram also noted that the income calculation on a secured loan, or the amount you can borrow from the lender, is calculated differently to a remortgage. Therefore, it may be easier to raise funds through a loan than a remortgage, especially if you have bad credit.   

“You can often still borrow on a secured loan, even when you aren’t able to raise funds through a remortgage,” Tristram stated.

In addition, he advised consumers to always check the fees and charges on their loan agreement.

“The majority of secured loans come with low or no early repayment charge, you should always ask your broker about this,” he said.

Personal loans and lower borrowing costs

While some may be tempted to take out a secured loan for home improvements worth less than £10,000, Tristram recommended consumers to look towards a personal loan.

“The fees involved in a secured loan for an amount under £10,000 often mean the rate isn’t as attractive,” he elaborated.

When it comes to rates, borrowers with a bad credit score should be wary that it is unlikely they can access the best rates being advertised.

Equally, the loan market remains highly competitive with a number of providers offering the best personal loan rate on the market for £10,000. This is set at a 2.8% representative Annual Percentage Rate (APR).

However, these providers do differ in other aspects. For a more detailed comparison on the best personal loan rates on the market visit our charts.

Current personal loan rates

Across the board, the average loan rates have remained largely static, according to Moneyfacts data.

Loans for £7,500 and £10,000 stayed at an average rate of 4.4% since May last year, while the same rate for loans at £25,000 has remained at 4.6% since September.

Still, loan rates have fallen since last year, and therefore a loan for home improvements remains a viable option.

“Consumers looking to consolidate their debts or perhaps even fund the cost of some home improvements will be pleased to see loan rates have fallen since last year,” said Rachel Springall, Finance Expert at Moneyfacts, in January this year.

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