Getting A Kitchen On Finance
Can You Get A Kitchen On Finance?
There are several finance options to consider when buying a kitchen.
An unsecured personal loan could be a good option if you borrow around £10,000. Your first recommendation would be to look at a personal loan comparison website to ensure you are getting a competitive interest rate. An unsecured loan does not require using your home as collateral. Therefore, you will not risk losing your home if you cannot make the loan payments.
If you’ve decided on the kitchen you want and which kitchen supplier you’re using, remember that most kitchen companies offer unsecured finance through a Bank or Finance House. These loans have a significant advantage because they are protected by Section 75 of the Consumer Credit Act, meaning that if there is a problem with the kitchen installation or the quality of the product, you can claim against the loan provider.
For upmarket kitchens costing £100,000 plus, you could consider a second mortgage or remortgage. A CeMAP (Certificate in Mortgage Advice and Practice) qualified mortgage broker would be able to advise you on the most appropriate option for your needs.
Look online at a secured loan calculator to understand the cost. Several factors, including your credit history and the amount of equity in your home, will determine the actual rate you end up paying.
With these types of loans, you need to remember that you could lose your home if you fail to maintain repayments.
HELOC Loan To Buy A Kitchen
Another consideration would be a HELOC (Home Equity Line of Credit) loan. Again, this loan is a secured second-charge mortgage, meaning that the lender could take possession of the property in the event of non-payment.
With a HELOC loan, the lender agrees to an amount that can be borrowed. The difference with a HELOC loan is that it does not have to be taken in full when the loan completes, allowing borrowers to draw down funds as and when needed.
A HELOC loan works well with a home improvement project in that you can borrow £40,000 for a kitchen this month and a further lump sum of, say, £30,000 in four months for a bathroom.
HELOC loans are very popular in the United States, and some UK lenders are branching into this type of lending.
What If My Kitchen Supplier Has Declined Me?
Most kitchen companies like Wren, Wickes, Magnet and even independent suppliers work with two or three finance companies or banks. They would have submitted your credit application to the lenders they work with.
Some reasons why lenders decline credit applications:
Your credit score is too low
You may have adverse credit registered against you, e.g. a default or county court judgment (CCJ). You can ask the lender which credit reference agencies they use and approach the agency for your credit file. Most lenders use either Experian, Equifax or TransUnion.
The lender might consider you can’t afford the loan. Every lender has a strict affordability assessment to ensure that you can afford the loan in addition to other credit you might already have.
You might still be in a probation period with a new employer. The lender may want to see you pass your probation period before granting a loan.
You may still have other options to finance your kitchen. However, you need to be careful because if you’ve already had two or three declined loan applications, your credit rating is likely to be poor, meaning you are considered a high-risk borrower. As a result, any lender that is prepared to work with you is likely to charge a considerably higher interest rate.
Rather than purchase the kitchen with a high-interest loan, it’s worth considering delaying the purchase until you improve your credit score. At this point, you could apply for a loan with a more competitive interest rate.
If the kitchen really needs replacing, then a loan from a family member might be a better solution.
Can You Get Finance For A DIY Kitchen?
Many people take out finance to carry out home improvements, including kitchens.
It doesn’t matter whether you are fitting the kitchen or getting a professional kitchen company to provide and fit it. When appointing a kitchen installer, consider their cost in your calculations for the amount of money you need to borrow.
As with most tradespeople, it is best to shop around for a competitive quote or, better still, get a recommendation from family or friends.
Best Kitchen Finance Deals
To ensure you get a suitable finance deal to purchase a new kitchen, you need to shop around for the best rate.
The loan amount you want to borrow is a crucial factor in deciding what options you will have. Generally, unsecured personal loans are only available up to around £30,000. As mentioned, the benefit of a personal loan is that you are not offering your home as security. One disadvantage of a personal loan is that the maximum time you have to repay the loan is generally seven years, meaning that monthly repayments can be pretty high.
If you want to borrow £50,000 or more, a further advance, remortgage, or second charge loan may be a better solution. You can borrow more money and have more time to pay it back. This means you can spread the cost over 30 years. As a result, you will have smaller monthly payments.
Most lenders offer fixed rates meaning you have peace of mind that your repayment won't increase during the specified period, which is generally two, three or five years.
How To Finance A Kitchen Remodel
To finance a kitchen remodel, determine how much money you need to borrow. This can be a complex procedure, but it's essential to get it right.
The new kitchen is not only expensive but there are also other costs involved. These include removing and disposing of the old kitchen and doing any necessary building work before installing the new one.
If you're doing the work yourself, borrowing a bit extra to cover any unexpected expenses is a good idea. Should the project go to plan and you have surplus monies left over, most second mortgage lenders allow you to make capital repayments and reduce your loan balance. If possible, making extra payments on your loan is highly advised. This will help you pay it off faster and reduce the amount of interest you have to pay.
As mentioned, a HELOC (Home Equity Line Of Credit) loan is ideal for any home improvement project. If the project costs £80,000, you could get a HELOC loan of £100,000 agreed. You could withdraw the £80,000 required and then draw down up to a further £20,000 for any unexpected costs.
With a traditional second mortgage, if you had applied for £80,000 and needed an extra £20,000, your loan application would have to be freshly underwritten. This can be a lengthy and costly process. In addition, most lenders require that a loan has been running for at least six months before they will consider further advancing.
To see if you qualify for a second mortgage, apply now and submit some basic details to one of our advisors. We’ll come back to you with more information, under no obligation.