Home improvements can be expensive, even if you take the DIY option.
For many of us though, they’re worth it. Not only can home improvements boost your quality of life, they can also increase the value of your property: a recent piece of research from mortgage lender Halifax found that the average home improvement added almost £5,000 to the value of a house.
What’s more, many of the improvements which made the biggest difference to house prices were relatively inexpensive: the top ten included living roofs, bi-folding doors and renovating period features.
If you want to pay for a home improvement or repair project, there are lots of ways to do it. In this article, we’ll look at some of the best ways to pay for these projects - including home improvement loans - so that you can make the right decision.
If you’re looking for a flexible personal loan of £1,500-12,000, you can take a look at our loan calculator or make an application at www.koyoloans.com. Representative APR 27%.
How to pay for home renovations
As the examples above show, homeowners can make a big difference to their house with even a modest investment. So in this section, we’ll look at some of the best ways to pay for improvements around £1,000-10,000.
This could cover something like bi-folding doors, new windows, or even a new bathroom or kitchen.
If you have enough savings to pay for your home improvements, you’ll almost always find that this is the best option. Borrowing generally carries a cost (fees and interest), so by paying in cash you’ll avoid these altogether.
However, you should always keep a savings buffer for emergencies. So, if using your savings would wipe out this buffer, you should consider delaying the purchase or using another option.
Unsecured personal loan
This type of loan is a flexible, simple way to borrow money to fund home improvements.
You borrow a lump sum, which you use to fund the home improvements. You then repay the loan in monthly instalments, which are fixed, so you know exactly what you’ll need to budget for.
You can generally borrow anything from £1,000-£20,000, although different lenders will have different limits. The interest you pay (and your eligibility in general) will often be strongly affected by your credit history - in general, risky borrowers will face higher interest rates and be considered for lower loan amounts.
An example of a provider of unsecured loans is Koyo, which provides personal loans in the UK.
For more information on personal loans, take a look at our complete guide to how home improvement loans work.
For people with good credit scores, many credit cards offer introductory periods with low or zero interest. This can be a good way to fund home improvements if you’re disciplined.
The reason you’ll need that discipline is that once that introductory period ends, the interest rate payable generally increases significantly. For that reason, you’ll usually want to pay it off quickly.
Paying with a credit card isn’t always possible - many tradespeople won’t accept credit card payment because they have to pay a fee. However, if you can pay at least part of the balance with a credit card, you’ll also benefit from extra financial protections.
Lastly, whether or not a credit card is a good option for you depends heavily on your credit history. Borrowers with a very good score are likely to have their pick of offers, and the best rates. If that’s not you, it can be much harder to get a good deal.
Related post: Personal Loans Vs. Credit Cards – Which Is Best For You?
Bonus: rent out a room
For a more creative way to raise - rather than borrow - money for home improvements, you could also consider renting out a spare bedroom. The Rent a Room Scheme allows people in the UK to rent out a spare room in their property and earn up to £7,500 each year, tax-free.
You can rent out a room or even a whole floor, but not a self-contained flat - find out more here.
What’s the best way to pay for expensive home repairs?
Of course, many home improvements or repairs can be much more expensive. If you’re looking at a loft conversion, for example, or repairing damage caused by subsidence, you might need to raise tens of thousands of pounds. In this section, we’ll look at some effective ways to do that.
Remember though that damage to your home will often be covered by your home insurance - so it’s always worth checking your policy first.
Secured personal loan
A secured personal loan is similar to an unsecured personal loan, with one key difference: the lender takes an asset (in this case your home) as “security”, meaning that the lender can take control of your home and use it to make a recovery if you fail to make monthly repayments in full.
As a result, the lender has more protection, so:
- Secured loans have much higher credit limits (tens or hundreds of thousands of pounds).
- Secured loans might have lower interest rates, and are likely to have different credit requirements.
You should think very carefully before putting your home at risk though, and consider what might happen if your circumstances change.
If you have an existing mortgage, you might be able to remortgage or access additional borrowing through your existing mortgage and use that money to fund home improvements.
This can be a good option if you want to fund particularly expensive home improvements, as you might be able to borrow tens of thousands of pounds if you have enough equity in your property.
However, you’ll often be making payments to your bank or building society over upwards of 20 years, so that can mean that monthly payments really add up, even if mortgage rates stay low. And as a mortgage is a form of secured loan, your home is at risk if you fail to make repayments in full.
What if I can’t afford home repairs?
A loan is a way to spread the cost of a purchase to make payments more manageable - it’s not intended as a way to make unaffordable purchases.
With that in mind, when thinking about taking out credit to fund home repairs, you should always consider how you would make the repayments, and how affordable these would be.
If repairing your home would be unaffordable, even with the credit available to you, you may be able to access help. The Citizens Advice website is a good place to start.
What’s the best way to pay for home improvements and repairs?
The best way to pay for home improvements will depend heavily on your personal circumstances, but to help guide your decision, we’ve put a summary below:
Why it’s good
What to watch out for
Cheapest way to fund home improvements, since you don’t pay interest or fees
Make sure you don’t wipe out your savings - keep a buffer for emergencies
Unsecured personal loan
Relatively small improvements (<£20,000)
Simple, flexible and easy to understand. Fixed payments
Can be an expensive form of credit - be sure to shop around
Secured personal loan
Larger improvements (>£20,000)
Using your home as security allows you to borrow more
Your home is at risk if you fail to make full repayments
Smaller improvements, where you know you’ll be able to pay off the balance in a short time
Many cards offer low or zero interest introductory periods; paying with credit card gives you extra protections
Rates might increase sharply after a fixed period; not all tradespeople will accept credit card payment
Large improvements such as a loft conversion
You’re able to borrow against the value of your home
You’ll usually be paying off the improvements over a very long period, which can make it more expensive
When you’re thinking about home improvements, it’s worth considering how you’ll pay for them right from the start.
Hopefully, the guide above is useful and will help you to find the right option for your circumstances.
And if you think an unsecured personal loan could be a good fit for you, you might want to take a look at some of the options available. Our loan calculator is a great place to start.