Can I Get a Home Improvement Loan With Bad Credit?
Home improvement and renovation loans can be a fantastic tool to allow you to redecorate, remodel or extend your property. It is one of many uses for second mortgages in the UK, with many property and homeowners adding many thousands of pounds to the value of their properties through home improvements and refurbishments.
Securing a loan can give you the freedom to make large-scale changes to your home without having to pay the money upfront. Many people are worried that their bad credit score will affect their ability to get a loan, particularly in the case of mortgages and secured loans.
Can You Get A Home Renovation Loan With Bad Credit?
The short answer is yes. You can receive a home renovation loan no matter what your credit score is. As long as the lender believes that you are able to repay the monthly instalments, they should be willing to give you a loan.
Often, borrowers with bad credit will opt for a secured loan, which in practice, means that the money you borrow is borrowed against the asset in question; such as the property you are renovating.
This means that the lender has peace of mind knowing that if you are unable to repay the loan, they will be able to recoup their losses against your asset, by for example, repossessing a property.
The beauty of secured loans is that because the lender can be more confident in your repayments, you will probably be able to borrow more money, as their risk is lower than if the loan were unsecured. This can be very useful as home improvements can end up being quite expensive. If you're planning to do something like building an extension this is probably going to require quite a large loan.
If I Have Bad Credit Is A Secured Loan My Only Option to Renovate My Property?
No, you will often have the choice between a secured and an unsecured personal loan. Many people will feel anxious about borrowing against their property which is understandable.
It is important that you feel comfortable with the terms of your loan so make sure that you discuss this with your family and any regulated financial advisers you may have thoroughly beforehand and find out all of your options.
The advantage of a secured loan is that you will likely get a better rate on your loan because the lender has peace of mind knowing that the loan is secured against your property, likely to be your most valuable and cherished asset. You may find if you take a personal loan and you have bad credit that your rate is not as good.
You might be paying significantly more in interest than you would with a secured loan; a reflection of the risk that the lender will be taking in lending you an unsecured loan.
You should also remember that unsecured loans not only come with higher interest rates, but they will also only allow you to borrow up to around £25,000, whereas a second mortgage or other secured loan will be able to help you borrow more money.
By having an asset such as your property acting as collateral for any loan, the risk to the lender is reduced, enabling them to let you borrow more money, secured against the asset or property in question.
How Can I Use a Loan to Renovate My Property?
Getting a home renovation loan for bad credit or otherwise means you will have the required money upfront to make improvements to your property.
Making big changes to your property can be expensive, which is why home improvement loans are becoming so popular. The idea is that you will be adding value to the property with the money you borrowed and that you will be able to pay it back in time.
Depending on the amount of money you borrow a home improvement loan might be used for something like redecorating, or if you borrowed a larger sum of money you might be remodelling a bathroom or kitchen or even the whole property. What you do with your loan is up to you, the important thing is that you pay it back in line with the lender’s requirements.
Many people will already have a first charge mortgage on their property and thus, a second mortgage for home improvement purposes is a logical option to consider to fulfil your renovation needs.
Repaying A Home Renovation Loan in The UK
As with any loan, the most important thing is that you only borrow as much as you can afford to repay on a mortgage.
Before you even begin to look at the loans available to you, you should take the time to work out how much you will need and whether you can afford to repay that in monthly instalments alongside your first charge mortgage. Also, take into consideration that you will need to meet your repayments on any other expenses you have.