Home Improvement Loans
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Compare unsecured loans for home improvements or renovation
If you’re planning to renovate your home, convert an outbuilding or extend part of the property you may be considering taking out an unsecured personal loan to pay for these home improvements. Before you sign on a lender’s dotted line, though, it would be a good idea to shop around by comparing loan offers from a range of different loan companies, because interest rates on unsecured loans can vary significantly from one lender to the next.
Different lenders also have different lending criteria, so if you have a poor credit history it’s even more important that you shop around for the best loan deals.
Is an unsecured personal loan the best option for home improvements?
Only you can answer that question, because it does depend on your own circumstances. Some homeowners will take out a secured loan against their property to cover these improvement works (known as a ‘second charge’), because secured loans are usually cheaper and are sometimes easier to obtain as well.
However, this does mean there will likely be two concurrent loans taken out on your home – this new secured loan and your existing mortgage, and you’ll also be limited to borrowing against the amount of equity you have in your home rather than it’s full market value, which means this type of ‘second charge’ wouldn’t be suitable for a homeowner with an interest-only mortgage.
Unsecured loans usually have higher interest rates because they represent a higher risk to the lender, but on the plus side they aren’t secured against your home, and unlike a second charge they usually aren’t limited by amount of equity you currently hold in your home either, which means some borrowers might be able to borrow more this way, particularly if they’re a high earner.