As more and more individuals decide that it would be more affordable to remodel their current homes rather than buy another one, finding the money required to pay for home improvement projects becomes an issue. Although finding the money to buy a singular piece of furniture or a new rug is relatively easy, things get considerably more complicated if you want to remodel the entire home or make other major changes.
Generally speaking, whenever it comes to spending large amounts of money, the best options is to save up until you have enough. Unfortunately, using your savings is not always an option, making borrowing the money the only viable alternative.
This having been said, there is a right way and a wrong way when it comes to borrowing the money for home improvement projects. Making the wrong choice can put you in debt for several years. On the other hand, if you know what to look for in terms of financing can not only make the debt more affordable but even help you repay the money twice as fast. Here are your main options:
- Use a credit card (only in certain situations)
Credit cards are often a good option if you need to pay for small purchases. They can be used on the fly and the debt should be manageable as long as you do not use over 25% of the available credit. If you need to purchase supplies of cheap building materials, using your credit cards shouldn’t be a problem, however, avoid spending too much money. Utilising too much credit or maxing out your credit card will have a large negative impact on your credit rating.
- Apply for an unsecured loan
If you have a good credit rating and up to £50,000 in order to remodel your home, you should be able to get an unsecured loan without too much effort. This will give you access you a large amount of money in very little time, however, you may have to pay large interest rates.
In addition to this, most lenders will not be willing to renegotiate your instalments if the debt ever becomes too expensive. It is also worth mentioning that you will likely have to pay charges if you want to repay the loan early.
- Get a secured loan (if you have a stable source of income)
Secured loans are the most popular choice of homeowners who want to remodel their home. Although you will have to provide collateral (your home or car), the interest rate attached to this type of loan will be considerably lower than that of an unsecured loan.
A noteworthy advantage is the fact that secured loans can actually help improve your credit rating, provided that you repay it on time. It is also worth mentioning that the repayment periods are longer than those of other types of loans and lenders will be more flexible when it comes to renegotiating the instalments.
- Re-mortgage your home
Lastly, you can re-mortgage your home in order to pay for the home improvements. This will allow you to borrow a very large amount of money, making it useful for complete renovation projects. Re-mortgaging your home may also secure a better interest rate when compared with other financing options. The downside with this option is the fact that you need to have a lot of equity in your home. For some, this will mean that they have to make early repayments to their current lender, which can be expensive.
Furthermore, keep in mind that not repaying the mortgage on time can lead to having your home repossessed.