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Home improvement loans

Home improvement loans

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Last updated: 10 August 2021

As a homeowner, the time may come when you want to take out a loan for refurbishments or repairs. Some will do this to increase the value of their property whilst others may just want to mix things up. When you begin to compare loans, it is important to assess what your reason is for the loan because that can affect how much risk you are willing to take on. This page will guide you through the different options you have when it comes to home improvement.

What types of home improvement loan can I get?

Secured loans

Secured loans are loans taken out which are secured against an asset, most typically your home. This is also known as a home equity loan.

These loans are often long term and for a large amount of money. They are called ‘secured' because they give the bank or the building society the ability to repossess your house or other valuable asset is you fail to make the monthly payments. However, this means lenders have the ability to offer lower interest rates over a longer period as they see them as low risk. These loans are generally used by people without a good credit score who are looking to take out large sums of money.

Personal/Unsecured loans

Personal or ‘unsecured' loans are simple and quick loans taken out with a lender with a pre-approved payment plan. These loans are often short term and for a small amount of money, and do not require you to put your house up as collateral. They are commonly referred to as personal loans because they are for your own personal spending and therefore do not have to be for a specific project. These loans are generally used by people with a good credit rating looking for small sums of money.

How do I compare home improvement loans?

They key thing to consider when comparing home improvement loans is how much money you will need to get the job done. For instance, the maximum amount that can be borrowed unsecured is £25,000.

Your credit rating also determines how much you can borrow. Those with higher credit ratings are much more likely to be able to get a large, unsecured home improvement loan. There are three different credit rating agencies and different lenders use different ones, so if you get rejected from one that doesn't mean all hope is lost! 

Both unsecured and secured loans can either have fixed or variable interest rates and it is therefore important to make sure you know what type of loan you are getting. A variable interest rate means that your monthly repayments can change, whereas with a fixed interest rates your payments stay the same. Unsecured loans are therefore quicker, with short-term repayments but available dependant on your credit rating. It is therefore more suited to those with good credit looking for small improvements, but the interest rates tend to be higher. 

Secured loans are over a longer term with larger amounts of money but are riskier because your lender has the ability to take the asset which you secured the loan against. A secured loan is therefore more suited for a larger home improvement project or if you have a bad credit rating. The risk in securing your current property against a loan, however, should not be underestimated. You should always compare loans and your different options thoroughly before taking on a secured loan.

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Alternative options

Credit cards

If you only require a small amount of money, it may be better for you to pay for your home improvements with a credit card rather than a full loan. Many credit card companies offer 0% interest for an extended period of time on your larger purchases. Therefore, you have the option to refit your kitchen or your bathroom on a credit card and pay it off directly. Ultimately, credit cards work best if you know that you can pay it off quickly. Before you use a credit card you will still have to do a credit check and you will need to make sure a lender is prepared to give you a low interest card.


Similar to credit cards, authorised overdrafts can be a good option for those looking to make small home improvements. These can be done with your bank and are typically much cheaper than taking out a loan, having to pay just a small fee every month. However, when taking an overdraft, you must make sure it is authorised, meaning you have to contact the bank before you spend the money. They will then decide how much they are willing to let you have based on your credit history.

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Fergus Cole

Author: Fergus Cole

Fergus is a journalist specialising in the personal finance, energy and broadband sectors. He also has a passion for travel and adventure so tries to make the most of this in any spare time he gets.

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