Home Renovation Loan

Whether you want to make home repairs, renovate, add an extension, refurbish your kitchen, buy new appliances, re carpet or just furnish your house, a home renovation loan is an option which may help you finance these home improvements.

Renovation loans are popular with homeowners who either don’t have huge amount of equity in their homes or don’t wish to deplete the amount of equity they have built in their home. Unlike a home equity loan or line of credit, a personal loan is unsecured, meaning your home or another asset will not be used as collateral, thus keep the equity in your home intact. So by opting for a renovation loan you are improving the value of your home without using the equity in it. Home Renovation loans have the benefit of being very flexible, so once your loan is approved, you can use the money for pretty much any type of renovation you wish.

To estimate your monthly repayments of your home renovation loan try our relayment calculator below, simply enter your loan amount and preferred period, the estimated monthly repayment for each of the renovation loans in our comparion table will then be calculated, to rank these simply click on the "monthly repayment" column header.

Even though renovating your current house or apartment often works out a lot cheaper than moving to a new home, many renovation projects still require a significant budget. One of the options to fund your renovations is a personal loan that will allow you to use the money to be used for a renovation project, this guide is designed to help you decide whether this is the right finance option for your project.

 

Advantages of a Home Renovation Loan

  • Access to the cash you need - A personal loan provides ready access to all the money you need to complete your home renovation project, as once approved the full amount of your approved personal loan will be transferred to your account. Most lenders offer renovation loans of $5,000 to $50,000 repayable over terms between 1 and 7 years.
  • Competitive Interest rate - Unsecured personal loans generally feature lower interest rate than most credit cards and you may have the option to fix the rate for the duration of your loan so you’ll know exactly what you’ll need to repay each month for the full loan term.
  • Allows you to repay the debt fast - By opting to fund your renovations through a personal loan means you are able to repay the debt much faster than if you chose to add the loan amount to your mortgage.
  • No security is required - As the renovation loan is unsecured there is no need to provide any collateral or security as part of the loan contract.
  • Extra Repayments - many renovation loans allow extra repayments to be made which enables you pay of the loan earlier and save on interest charges.
  • Positive impact of your credit rating - by managing a renovation loan carefully and repaying it on time it will enhance your credit rating

 

Disadvantages of a Home Renovation Loan

  • Not the lowest Interest rates - As no collateral is provided with an unsecured loan the lenders will charge a slightly higher rate of interest than if the secured loan alternative, as a means of balancing the perceived greater risk.
  • Good Credit rating - To successfully apply for a renovation loan you will need a good credit rating free of any blemishes.

 

Alternatives to a Home Renovation Loan

If you find that your credit rating is preventing you being accepted for home renovation loans, one option is to consider a secured, or homeowner, loan that uses your home as security. When considering this option it is critical you remain aware of the fact that if you default on this type of loan you run the risk of losing your home, as the lender will have the right to repossess it to cover any outstanding debts.

Secured loans can be a good option when you are planning a big renovation project as they can be used to borrow larger amounts - depending on how much equity you have built up in your home.

For smaller renovation projects a 0% p.a. credit card is a viable option - so long as you are disciplined enough to limit your spending and manage you repayment plan so that the balance is paid off before the interest-free period comes to an end.

 

Selecting the best Home Renovation Loan

Selecting a home renovation loan with the best terms and lowest interest rate can make a significant difference to the amount it will cost you to borrow the funds you need for your project. Once you have set and validated your renovation project budget, by getting all aspects of the job quoted, you are ready to start comparing the renovation loan options. Here are some tips on how to compare home renovation loans:

Affordability - This crucial first step is focused on working out what the monthly repayments on the amount you wish to borrow are going to be. To calculate your monthly amount use our Free Personal loan repayment calculator by entering your loan amount preferred period and the interest rate offered by your lender ,we will estimate your monthly repayment. Once you have established this you need to work out if you are able to afford this each month for the full term of the loan.

Flexibility - Loan terms are generally available between 1 and 7 years. To ensure any personal loan continues to meet your needs you should look for loans that offer a high degree of flexibility, so they continue to meet your needs should your circumstances change. Typical features to access are the ability to make extra repayments, pay your loan out early without penalty and the flexibility to change your loan terms at anytime during the loan term.

Frequently Asked Questions

How do I work out the best way to finance my home renovation?

Step one is to figure out how much your plans will cost and what you can comfortably afford. Don't risk overstretching by doing too much at once.

Once you've established what you can afford, it's a good time to consider how to finance the work:

  • Our Personal Loan Repayment Calculator will help you estimate your monthly repayment cost for a home improvement loan based on the amount you wish to borrow and the rates the lenders are offerring.
  • Using existing savings could help you avoid paying interest costs. However it's a good idea to keep some savings aside to cover any unexpected expenses
  • Credit Cards and overdrafts could cover smaller amounts over the short term, but they may work out expensive if used for longer term borrowing
  • If you have a mortgage on the property, you may be able to take additional mortgage borrowing. Remember that this may extend the term of your mortgage, the debt will be secured against your home, and a set-up fee may apply.
What tips should I remember when planning renovations to my home?

Work out your costs
Plan your work in detail before starting and include as much detail as you can as this will make your cost estimates more accurate. If you’re hiring outside help you’ll get more accurate quotes from tradesmen if you have detailed plans. Remember to set aside money for delays or unexpected overspend.

Hiring tradesmen
You’ll need a quote (rather than an estimate) to finalise your costs. Take the time to find the right builder. Solicit recommendations from friends or family and get multiple quotes before signing off on any project. Don’t be afraid to ask for references or to talk to past customers. Remember, your home is your most important asset so you need to be sure you can fully trust anyone who is going to be working on it. 

Planning or Building Permission
If you’re changing the structure of your home, or adding a garage or additional structure, you’ll need to take a look at the planning regulations in your area and you may have to apply for planning permission. To do this you’ll normally need plans drawn up by an architect.