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A Guide To Home Improvement Loans

There are different types of home improvement loans. Following information will help you select the right type of loan.

What Type of Projects Are Eligible for Home Improvement Loans?

You can use this loan to improve the condition of roofing, siding, windows, kitchen, bathroom, basement, flooring and other structures of your home. You can upgrade your electrical system, install a heating and cooling system, build a garage, or build an addition. Finish an incomplete basement or attic. Install a new driveway or walkway.

Add new flooring or refinish the existing one. Remodel whole kitchen or just a part of it. Install solar energy system, energy conserving system or fire safety equipment. This loan is not available for luxury and not so necessary projects like building a swimming pool. However, it depends on the type of loan you borrow. With some types of loans, like a personal loan, there is no restriction on how you use the loan money.

What Type of Home Improvement Loans Are Available for This Purpose?

• First time home buyers can borrow a government backed home improvement loan. It is available through The Department of Housing and Urban Development. Home improvement loans under this program are available only to homeowners who intend to use the home for their own living. There are many restrictions with these loans, so you should first check if you are eligible for such a loan.
• You can borrow a home equity linked loan. The amount you can borrow under this loan depends on the status and percentage of your equity in the home. You will get a lump sum amount which you pay back in fixed instalments over the loan term.
• You can use refinancing which is a second mortgage. The amount you can borrow this way depends on the status of your mortgage and equity.
• A line of credit is another source of fund for this purpose. Once allowed, you draw it as and when needed. It has adjustable interest rate.
• If you are not eligible for a home equity loan, you can borrow a personal loan. This loan is the most expensive option. You will not get any tax deduction. It may be your only option if you are not eligible for other types of home improvement loans.
• You can use your credit card to fund a small project. The amount you can borrow this way will depend on the credit limit set by your credit card provider.

What Is the Minimum and Maximum Loan Amount Available for This Purpose?

It depends on the type of loan product and the type of lender you have selected. Generally, you can borrow a minimum of $5000 and a maximum of $50,000. If you are using your home equity as collateral, you are eligible to borrow up to 75% of LTV (loan to value) ratio. A personal loan is generally limited to a maximum of $15,000.

Are You Eligible for a Home Improvement Loan?

It depends on several factors. Your credit score is the most important one of them. Any type of lender is going to first check your credit reports. If you have good credit history, you are eligible for low interest loans. Poor credit rating will mean you have limited access to different types of home improvement loans. However, you can still borrow a low interest loan if you can provide a good collateral or security.

Should You Borrow a Loan for Your Home Improvement Project?

This is an important thing to consider. Will the home improvement project increase the value of your property? Will you have an income source to pay off your debt? What are the other loans you have borrowed? What are your other major financial commitments in the future that will require funding?

If it is a small project that you can easily pay off in time, then go ahead and borrow this loan. If it is a large project, think carefully and borrow only the amount that you can recover or pay off somehow. Do not try to add or improve something so much that it is beyond the expected return on your investment.

It is important to calculate the project budget before applying for home improvement loans. Such a project can easily go over the budget so first talk to a few contractors to get a close estimate. Stick to the plan once you start the works. Keep a small contingency fund to take care of unexpected expenses that always crop up during such projects.

7.8% APRC Representative

Representative example: Assumed borrowing of £37,700 over 180 months, with a fixed borrowing rate of 6.4% per annum for the first 36 months, followed by 144 months at the lenders standard variable borrowing rate of 5.9%. There would be 36 monthly instalments of £356.89 followed by 144 instalments of £347.59. Total amount payable £63,021 comprised of; loan amount (£37,700); interest (£21,791); Broker fee (£3000) Lender fee (£530). This would result in an overall cost of 7.8% APRC.

 

Accepted.co.uk is a trading style of Paloma Digital Limited. Paloma Digital Limited is an introducer and we will search our panel of brokers to find the right loan for you. Data Protection Registration Number: Z9868049.

Paloma Digital Limited is authorised and regulated by the Financial Conduct Authority. Firm registration number 769794. See www.fca.org.uk

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.

 

7.8% APRC Representative

Representative example: Assumed borrowing of £37,700 over 180 months, with a fixed borrowing rate of 6.4% per annum for the first 36 months, followed by 144 months at the lenders standard variable borrowing rate of 5.9%. There would be 36 monthly instalments of £356.89 followed by 144 instalments of £347.59. Total amount payable £63,021 comprised of; loan amount (£37,700); interest (£21,791); Broker fee (£3000) Lender fee (£530). This would result in an overall cost of 7.8% APRC.

Accepted.co.uk is a trading style of Paloma Digital Limited. Paloma Digital Limited is an introducer and we will search our panel of brokers to find the right loan for you. Data Protection Registration Number: Z9868049.

Paloma Digital Limited is authorised and regulated by the Financial Conduct Authority. Firm registration number 769794. See www.fca.org.uk

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.

IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.

Paloma Digital Ltd. Company Registration No. 6934249. Registered Office: Office 229, 275 Deansgate, Manchester M3 4EL.