A home improvement loan could help you fund upgrades or repairs to your home. Whether secured against your property in the form of a second-charge mortgage, or taken as an unsecured personal loan, home improvement loans allow you to borrow money for projects like renovating your kitchen, adding an extension, or making essential repairs. They usually come with flexible terms and competitive interest rates, making it easier to manage the costs of your renovations project.
Before making your decision, consider exploring the various reasons for a loan:
From a new kitchen to bathroom remodelling, a home improvement loan could fund all types and size of renovation.
Get your quoteCover the cost of crucial home repairs like roof replacements or plumbing fixes.
Get your quoteInvest in energy-saving and sustainability upgrades such as new windows or solar panels.
Get your quoteIncrease your living space with a new room, a side or rear extension, or an extra floor.
Get your quoteBoost your home’s visual appeal with landscaping, a balcony, pointing and paintwork, or other exterior enhancements.
Get your quoteHandle unexpected repairs promptly with quick access to funds in as little as 14 days.
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When you search for a loan online or compare rates with our home improvement loan calculator, you'll find lenders providing both an interest rate and an APR (Annual Percentage Rate). Let's see how they compare:
The interest rate is the cost of borrowing the loan amount, paid back as a percentage of the loan each month. Several factors affect the interest rate on your loan, including the bank of England base rate and your own credit history. Loans for bad credit usually carry higher interest rates, while rates for secured lending tend to be lower than average.
APR is the interest you'll pay on the loan plus additional fees charged set by the lender. APR is therefore usually the higher - and more accurate - amount. Typical APR on home improvement loans is currently around 6.2% - 6.7% (correct as of Tuesday 30th July, 2024). When a lender says APR is "representative", it means at least 51% of people receive this rate or lower.
Taking a home improvement loan is an exciting moment for any homeowner but it's a big step when the loan is secured against your home. Interest adds significant cost over time and building work can easily run over budget, so it pays to think carefully about your renovations before you start. Use our home improvement loan calculator, compare the whole market and make a plan for your repayments. You may find that saving up for your project in advance is the better option for you.
To be eligible for a home improvement loan, second charge lenders typically require you to be a UK resident who is a homeowner with an existing mortgage. Most will also require that you have a good credit score and a regular income of at least £10,000 a year. Students, and homeowners with a history of CCJs or bankruptcy, will usually not qualify, although there are specialist lenders than may consider your application.
One of the main reasons homeowners fail to qualify for a home improvement loan is a poor credit score. You can improve your score by making sure your bills are paid on time and reducing any debts. It can also pay to address errors on your credit file, such as old accounts that remain active, missing information, or bills that still show as unpaid.
Where possible, you should look for a home improvement loan with a low interest rate. Sometimes, a slight adjustment in the amount you wish to borrow can change the lender's rate, so make sure to try a range of options until you find the rate you're happy with.
A fixed interest rate means your payments won't change throughout the loan term, while a variable rate can change with the economy and the Bank of England's base rate. If you have a good credit score, lenders are more likely to keep your interest rates low.
Lenders offer a range of repayment options when you calculate your loan. The more time you wish to spend paying back your loan, the lower your monthly repayments are likely to be, but the more you'll pay in total interest over time.
If you're looking to save interest by repay your loan sooner, you can sometimes make larger over payments at no extra charge. Most lenders will also give you the option to settle your loan early, but they'll usually ask for a fee or a early repayment charge to do so.
If you can add a new room, extra floor or extension, you could well increase the asking price of your home. Energy-saving additions like roof insulation, draft-proofing or new appliances are always attractive to energy-conscious buyers.
But not every home improvement project adds value. Extensions can be expensive and may not "pay for themselves" if the resale market is slow. On the other hand, lower-cost improvements like redecorating or exterior paintwork can change the overall impression of your property and offer more value for money.
There are several other ways to fund your home improvements project. You might consider using a 0% interest purchase credit card, an interest-free overdraft, a home equity line of credit (HELOC), or a debt consolidation loan.
You could also remortgage your home, which involves increasing your mortgage amount, paying off the original mortgage and using the additional funds to make your renovations. Keep in mind that unless your increase the term of your mortgage, your monthly payments will go up to cover the cost of the additional borrowing.
When submitting your application for a loan secured against your home, you'll need to provide proof to the lender. To help with the process, we've provided a checklist of documents you'll need to gather to prepare for your loan application.
‘’Secured loans may be a good option if you need to borrow a large amount of money and have a home to use as collateral. They often come with lower interest rates, making them useful for things like debt consolidation or home improvements.”
We make secured loans easier with detailed guides that walk you through every step.
While paying off a loan early can be financially liberating, it often comes with penalties. Some companies may charge you an early repayment fee for doing so. These fees typically range from the cost of one to three months’ interest. Before you overpay, check with your lender whether a fee will apply and how much it will be.
The amount you can borrow with a secured loan depends on the value of the asset you're using as security. Lenders will typically not loan you over 90% of your property value (loan to value ratio). But it's based on factors like your income, credit score, if you have any other asset to use and if you can afford the repayments. It's best to compare the market to see how much you might be eligible for.
In order to be able to borrow or qualify for secured credit, borrowers must have accumulated equity in a property. Equity refers to the part of your house you own entirely. You can calculate how much equity you have by subtracting the amount you still owe on your mortgage from the current value of your home. The more equity you have, the more you can potentially borrow. In simple terms, higher equity means you own more of your home, which can help you get a bigger loan.
When you take out a secured loan, you agree to make regular monthly payments to cover the loan amount plus interest. The interest rate might be a fixed rate or variable, depending on the terms you choose. If you choose a longer repayment term, your monthly repayments will usually be lower, but you will pay more interest overall. A shorter repayment term will have higher monthly repayments, but you will pay back less interest in total. Successfully keeping up with your monthly repayments means you maintain ownership of your home, while failure to do so could lead to significant financial and personal loss.
All loans come with risks. For example, your credit score may decrease if you fail to make your repayments on time. However, defaulting on a secured loan allows the lender to take possession of the collateral - your home. Before this drastic step is taken, it’s often possible to negotiate terms with the lender if difficulties arise. A default is noted on your credit report, will affect your credit score and future lending opportunities often resulting in terms that have more interest.
For a secured loan, having a "good" credit score between 881 and 960 can help you get better interest rates, but it's not always required. Since the loan is backed by your home, lenders may be more flexible with credit scores. Generally, a higher score increases your chances of approval and getting favourable terms. It's a good idea to compare lenders, using one of our calculators to get an idea of their requirements.
We have a selection of second-charge lenders who offer loans if you have a bad credit history and if you make your payments on time, you can improve your credit score. Our lenders also accept CCJs and defaults, even if they’ve occurred in the last 12 months.
Yes, you can sell your house with a secured loan on it. The money from the sale would pay off your secured loan together with your first-charge mortgage. Typically, your conveyancing solicitor will handle this aspect and deal with the lender during the sale process.
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