How does a home improvement loan work?
Home improvement loans and home loans are two very different things. A home loan refers to a mortgage or another form of borrowing where our property is used as security, and they're sometimes also referred to as "homeowner loans". In contrast, a home improvement loan is better thought of as an unsecured personal loan with a specific purpose - to pay for repairs or modifications to our property.
Because they're unsecured, home improvement and other personal loans tend to be limited in value – but they also don't come with the immediate risk of repossession if we fail to keep up repayments. Unsecured loans are typically available from £1,000 right up to £25,000 – but there are some providers who have started to offer unsecured loans of up to £35,000. The more we borrow, the longer we'll usually be given to pay it back – repayment terms vary from one to seven years, and sometimes up to 10, depending on the loan amount.
Who can apply for a home improvement loan?
Home improvement loan eligibility criteria vary, but applicants can check a basic list of requirements for each loan by hovering over the "will you get this loan?" text next to every deal listed above. Note that some of these loans are available only to existing customers – they're often at slightly better rates than they offer to non-customers.
Bear in mind that lenders will look at our credit histories when we apply for a loan. Some state in their eligibility criteria that they won't accept anyone who's been turned down for credit within a certain recent period – and every application we make will leave a mark on our credit file. Some lenders offer "soft quotes" for loans, which don't leave a trace, and give would-be borrowers a good idea of whether it's worth risking the full application.
As with any personal or unsecured loan, there are limits to how much we can borrow – and these will also depend on our credit histories. Anyone with a less than ideal credit file, or those applying for a larger loan may be asked for some form of security.
How long will it take to get the money?
Applying for a home improvement loan should be fairly straightforward as long as we have all the relevant information to hand – most lenders will provide a checklist of the documents we need. Once we have that to hand, a typical online application can take as little as 10 minutes, and many providers can make an instant decision based on this information.
Some providers will get the loan transferred to successful applicants within minutes; others may take up to 48 hours; still others may take a little while longer. If the lender is one that takes a little while longer, check whether they offer fast track processing, and how much they charge for the service.
How long can I take to repay a home improvement loan?
How long we can take to repay a loan depends in large part on how much we're borrowing. The minimum loan period is usually one year, and the usual maximum is around five years. Some lenders do offer longer terms than this, again depending in part on how much we're borrowing – the biggest unsecured loans can sometimes be repaid over seven or even 10 years.
The longer we take to repay the money, the more we'll end up paying in total: use the sliders above to see how extending the repayment period may decrease the monthly payment but at the cost of increasing the final sum paid over the length of the loan. In contrast, if we know we can afford to pay more per month, agreeing to a shorter repayment term can significantly reduce the overall cost of taking out a home improvement loan.
By law, anyone who has taken out a loan since February 2011 is allowed to make significant overpayments (up to £8,000 a year) without being hit by penalty fees – although we may still be charged admin fees or similar. This means we can always apply for a home improvement loan with lower repayments over a longer term, but then apply to overpay in the future, helping us save money by clearing the debt quicker.
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