Do you feel stuck in your home with its old interior designs and themes? Do you want to move out and buy a new house with the latest interior design style but do not have the money for it, or do you want to renovate your house?
Well, we just made it easier for you to understand what you need. Home improvement loans are something that could help you. Home improvements are vital when you want to add value to your house, or you want it to have a new look and the latest functions.
We will look at all the factors that affect you while taking a home improvement loan. But first, let us look at how to get a home improvement loan.
How do I get a Home Improvement loan?
Getting a home improvement loan is an easy process, but you have to take precautions with every step. Several banks offer home improvement loans at different interest rates and annual percentage rates or APR. You can fill out the form for home improvement loans in a bank or on online websites but ensure those websites are legally regulated.
The amount of a home improvement loan depends on the work you want to get done, such as renovating your bathroom or kitchen. The interest rates will depend on the amount you borrow and several other factors.
What are the types of home improvement loans?
There are two types of home improvement loans, unsecured and secured.
- Unsecured home improvement loans or personal loans are the types of loans that do not require you to pledge on a precious thing such as a house which is an asset.
- Unsecured home improvement loans are usually for small amounts and have low-interest rates; as there is no collateral you provide, the lender would not want to take any risks.
- Secured home improvement loans are the loans in which you pledge on a precious thing such as an asset.
- These can be long term, for a significant amount, high-interest rates and the lenders can be much more flexible in this case as they have a charge over your property, and if you fail to pay your loan back, the lender can take over your property.
When you take a home improvement loan, you may receive the entire amount at once or at different stages of the renovation work. The payment of your money by the lender will also depend on the amount you want.
The creditors do not usually give you the whole amount until the work is completed. They sometimes pay the last 5% after the job is done.
What all affect my home improvement loans?
- While taking any loan, you will always have to look at the interest rates and representative APR.
- The banks will see more significant amounts as more considerable risk and charge higher rates on loans for more substantial amounts.
- For home improvement, most banks lend between £25,000 and £50,000, and the representative APR ranges from 3% to 4%.
- If you plan to make drastic changes in your house and want to lend a large amount of money, you must look for secured loans. You can get secured loans for more significant amounts as it involves collateral. The bank will be less worried about the repayment as they have a charge over your property and can seize it if you fail to repay the loan, but secured loans also have higher interest rates.
Does it matter if I have a bad credit score or rating?
- Most banks look at your credit scores or ratings while evaluating your application. How good or bad your credit score is will affect how the bank would want to lend you as they do not wish to take risks with any considerable amount of money.
- Numerous websites can help you evaluate your credit report, but they are not all free of cost. If you are not happy with your credit score, you can always get help from the government’s helper service to get advice on bettering your credit report.
How long can I take to repay my loan?
- If you borrow a small amount, the repaying term will be shorter, but you will have to make large parts of the amount as instalments every month. But a short term loan is an excellent way to avoid paying extra money as tax.
- Long term loans can sound easy and less burdening initially as you will need to pay small amounts per month, but if you calculate, you end up paying much more as interest.
- On average, banks allot a period of 12 to 60 months to repay your loan, but this period can go up to 10 years in case of some banks
When you apply for a home improvement loan or any loan, you must make a list of the things you spend on and how much you spend every month. This will help you understand how much you will pay back every month to the bank. Banks take this amount for evaluating your home improvement loan approval.
Conclusion
It is easy to find a bank to give you a home improvement loan. You need to fill out the application in the bank or on a legally regulated website and wait for it to get approved. There are two types of home improvement loans, unsecured and secured or personal loans.
Unsecured loans are short term loans and do not require collateral. Secured or personal loans are long term and lend you significant amounts of money but require you to pledge on your property, such as your house.
While taking a loan, always compare the loan plan out in the market and compare the interest rates and representative APR. A good credit score makes it easier to get a loan; you can find several websites that can help you check your credit report.
Short term loans will require you to pay hefty amounts as monthly instalments, but it will save you the interest you would have to spend on a long term loan. Long term loans are usually for enormous amounts, but you do end up paying a significant amount only as interest.
Next time you feel your house has got boring, you can turn to home renovation and getting a home improvement loan can be a great help.
