For most people, extending your home is, in equal parts, exciting and daunting. However, the rewards (both in terms of finances and quality of life) are often worth the time and effort that an extension requires. If you’re considering the first extension on your home, there’s no shame in feeling slightly intimidated by the scale of things. Here are a few ways to make your home extension that little bit easier financially.
Take the time to look through your finances
First things first – looking over your finances in depth should be at the top of the list when you start considering a home extension. Lay out your income and expenses plainly and see where you could cut down your spending, or even bring in some extra money.
Ask yourself some honest questions: will the extension be too tight financially? Have you got the spare time to keep on top of things? Is it realistic to cut down on certain spending habits in the long run? This will help you come to an informed, realistic decision about your home extension and will make the whole process a lot less stressful for yourself.
When you’re sure you’re in a steady position to move ahead, we suggest building a structured financial plan, allowing you to keep on top of payments.
Make use of savings
While most of us (not all of us) are hesitant to touch our savings, they may be the best option for you in terms of financing a home extension. As an alternative to borrowing money, using your own savings obviously carries no extra fees or interest, meaning you’ll spend less in the long run.
However, using savings for a home extension is going to take a sizeable chunk of money out of your account. Everybody’s personal financial situation is different, so make sure to think long and hard about whether you want to make the commitment of using your savings.
Use a credit card
If you have a good credit score, applying for a credit card may be one of the best options available to you. Many banks or credit agencies offer lucrative introductory offers, with low or even zero interest rates.
Remember though – it’s essential that you’re confident with your self-discipline when it comes to credit cards. As the introductory period finishes (which is usually around 6 months or more), interest rates on your credit card could increase drastically. Due to this, it’s crucial that you pay off the money you take out as quickly as possible, in order to avoid those tough extra costs.
Additionally, you may not be able to pay for your whole extension using a credit card (many traders don’t accept them as they have to pay a fee), but they can still be useful for paying off a chunk of the cost. You’ll also get a level of protection from Section 75 of the Consumer Credit Act, which could help you out massively if there are problems during the project.
At the end of the day, your credit score has a huge part to play in whether you’re successful in getting a good introductory offer on a credit card. We suggest taking the time to look through your score and have a browse through some potential offers before getting started.
Take out a personal, unsecured loan
Personal loans are another option for financing changes to your home – they’re flexible, simple and are often quickly approved. Personal loans arrive in one lump sum and are paid back through monthly instalments.
This fixed instalment plan gives you a view into the future and allows you to plan out your budgeting with much more knowledge of what needs paying back. Koyo Loans is one example of a provider that supplies personal loans, with a £1,500 – £12,500 borrowing amount and a five year borrowing period, 27.9% APR Representative. Take a look at our personal loan calculator to get a clearer idea of the rates and amounts available to you.
Home extensions can carry hefty price tags, so savings, a credit card or an unsecured personal loan may not be enough to cover the costs. Secured loans offer you an alternative and are very similar to unsecured loans, apart from one fundamental difference: the lender will take an asset (your home) as security. This means that if at any time you’re unable to make your repayments in full, they could take control of your house.
On the other hand, because the lender has more protection, secured loans also carry a higher credit limit and lower interest rates. While the benefits are clear, especially if you’re taking on a bigger project, you should take a good amount of time to consider whether you have a strong enough financial foundation to take on a secured loan.
All in all, home extensions can be extremely exciting, adding value and enhancing your indoor spaces. How you finance the extension will depend significantly on your own personal finances, so make sure to consider which option is right for you.