Discoloured walls, pale kitchen cabinets and an unpleasant washroom require an upgrade promptly. If you don’t want to dip into savings or remortgage, you may be wondering: can you use a personal loan for home renovations? The answer is yes—however, one must know when it makes sense and when it doesn’t.
What is a Personal loan?
A personal loan is a sum of money that helps one spread the cost of a purchase rather than paying upfront. One takes a loan for purposes such as car repairs, medical expenses, education, etc.
The amount one gets depends on what they can comfortably afford to repay. The concerned person must repay the loan consistently for the loan term one agrees to.
For example, if you take a personal loan of £20,000 for bathroom remodelling over 5 years, you must repay the loan in 5 years, including interest and associated fees.
Individuals with good credit history and income may get instant approval. You get the final loan agreement within 24 hours in most cases.
Can You Legally use an Unsecured Personal Loan for Home improvement?
Yes, it is completely lawful to use a personal loan for home improvement in the UK. You may get one for home renovations, such as kitchen modifications, loft conversions, or bathroom refinishing. The amount you get on a personal loan for renovations is £1000-£25000 for (1-7years), depending on your needs and affordability. It means you must meet the eligibility and affordability criteria to get the loan.
You must know a few aspects before tapping personal loans for home improvement in the UK:
a) Identify your affordability
Borrowing only what you can afford to repay on the loan increases loan approval. It keeps your liabilities low and helps you pay your dues on time. You can use a loan calculator to identify that.
b) Check the terms carefully
Read each term mentioned in the agreement carefully before signing it off. Enquire about any aspect that you don’t understand immediately. Check for hidden fees and costs.
c) Provide only the required documents
Avoid complicating the application by providing all documents. Instead, analyse the requirement first and proceed accordingly. It saves you time and reduces the chances of loan rejection.
How Personal Loans Work for Home Renovations?
The process of applying for a personal loan for home renovations works like most loans do.
Step 1- Choose a loan amount: Identify how much you need for the home renovation. Consider savings, income and monthly payments before borrowing.
Step 2- Compare the loan options: find the most affordable loan option online. Compare APR, interest rates and total repayment amount.
Step 3- Apply online: Complete a basic loan application with accurate details. Provide name, email , contact number, loan purpose, and the amount required.
Step 4- Provide documents: Understand the loan documentation requirements and provide accordingly.
Step 5- Pass the credit assessment: The lender analyses your requirements against the documents provided. Accordingly, you get the loan agreement.
Step 6: Provide your consent: Read the terms and conditions, including interest, APR, total amount repayable, and monthly instalments, before accepting them.
Step 7: Get the loan amount: You receive the loan amount when you accept the loan agreement. It generally takes 24-48 business hours to get a loan amount.
Step 8: Pay the dues on time: Lastly, repay the dues as per the agreement. You can also set direct debits to avoid missed payments.
Representative example
For example, if you borrow £30,000 for a loft conversion for 3 years and 10 months at an APR of 7.8%, your monthly repayment would be £752.91, and you would pay £34,633.86 in total.
Note: It is important to know that shorter loan terms mean lower interest costs, and vice versa. Always analyse your loan agreement before consenting to payments.
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Pros and Cons of Using a Personal Loan for Home Renovations
Personal loans help you split the cost of costly home improvement projects. However, the interest costs increase the overall liabilities. Here are some pros and cons of using a personal loan for home renovations:
| Pros | Cons | How to manage cons? |
| No security is required to get a loan. It means you would not lose your home. | Higher interest rates than secured options, like mortgages | Shop around using comparison sites and check your eligibility with a loan calculator. |
| You may get quick approval on these loans in comparison to secured loans | Has payout limitations (typically £1000-£25000, or £35000, maximum) | You can use the loan for small renovation projects only. Later, check the possibility of refinancing the loan or getting an advance on the mortgage if you have equity in your property. |
| The monthly repayments remain fixed over the loan term of 1-7 years (typically) | Getting a loan requires a good credit score. Individuals with bad credit history may suffer rejection or be offered costly terms. | Improve your credit score before applying. Pay dues, improve income and consider secured loan options. It increases the chances of loan approval with bad credit. Get an updated credit report from Experian before applying. It will help you understand the difference between a credit score and a credit report. |
When should you pick personal loans for Renovations?
Personal loans are a good option for home renovations when you need quick, unsecured funding for small projects like kitchen renovations. They are suitable if you need funds quickly with a flexible repayment approach.
Here are some ideal scenarios to consider a personal loan for renovation.
- Small to medium decorations (£1000-£25000), such as kitchen upgrades and redecorating.
- You don’t want to provide your asset as collateral to get a loan.
- Counter urgent and time-sensitive home repairs within days. One may get a personal loan the same day for use.
- You have good credit scores (above 1100) and a stable income of £10,000 or more per year. In this case, you may get the loan at an APR of just 5.7%-6.2%.
When should you avoid personal loans for home renovations?
- Require cash £25000-£50000 for your home improvement needs
- You have a limited budget and cannot afford the high interest costs
- You have a large base of unsecured debt
- A poor credit score may make it hard to qualify for personal loans.
Final thoughts
Yes, you can use an unsecured personal loan for home improvements. It is about understanding the loan amount you can comfortably repay under the agreement. Compare costs and terms to find the ideal interest rate loan for your finances. Inspect the loan agreement carefully to avoid surprise fees and unnecessary hidden costs. Choose a comfortable repayment schedule without unnecessarily elongating loan payments.
