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How to finance home improvements

Financing home improvements

Home improvement projects can be very exciting. From improving the garden to redoing the kitchen, they present the opportunity to reinvent your living space by putting a personal touch on your home. Funding such a project is less exciting, however. Renovation can be expensive, and many projects do not get off the ground due to a lack of money. We look at some of the best options to find the cash needed for your home improvement plans:

Best Option – Savings

It’s a good idea to use your money rather than borrowing as you won’t find yourself in debt once the work is complete. If you already have savings – great! Think of home improvements as an investment. The work will likely increase the value of your property meaning the money used to pay for the work has probably earned you more than if it was sitting in the bank.

If you don’t have savings but are reluctant to borrow, carefully plan the work to figure out how much money you will need. When you have your figure, put a savings plan in place and save money each payday. You will need to be disciplined and may need to cut back on spending to reach your savings goal, but it’ll be worth it in the end.

Personal Loan

Renovations or house extensions can be very costly and, despite your best efforts at saving, you still might need to borrow cash. As debt goes, borrowing money for home improvements is a good one. You are borrowing money to improve your property, which in turn increases its value.

A personal loan online is a quick and easy way to access a large amount of money at a reasonable rate. There are plenty of online lenders who offer quick application and approval processes, usually lending between $2,500 and $35,000 over 3 to 5 years. You can compare different personal loans through friendly finance and read more about personal loan applications here.

Use value in your home

You can pay for home improvements through freeing up equity in your home by speaking with your mortgage lender about an advance. If you choose this option, approach the deal with caution and carefully review the terms offered. For example, your lender may only offer an extension at a higher rate or force you into a longer mortgage period. If you are coming to the end of your current mortgage deal you could look to move the entire loan (including the renovation costs) to a new lender. You may even find a better rate, saving you money!

Financing large ticket items

For home improvement projects that involve purchasing expensive items, such as a new kitchen, buying on finance may be a viable option. You won’t need to save a huge amount as many suppliers now offer good rates on ‘buy now pay later’ purchasing with little-to-no deposit needed. You will need to make sure you can afford the repayments though, as the financing will increase your monthly outgoings.

Less Recommended – Use a 0% purchase credit card

The credit card market is so competitive that providers offer great introductory rates to entice new customers. 0% purchase credit cards offer 0% interest on all purchases for a period, usually between 12 and 48 months. These credit cards can help to spread the cost of your home improvements at no extra charge. You can review credit card providers with Friendly Finance to find a deal that suits you.

The downside to a 0% purchase credit card comes when the introductory period ends. If you haven’t repaid your balance in full once the 0% interest rate period ends, you’ll automatically be switched to the credit card provider’s standard interest rate. This is usually between 18% and 24%. You must also remember to repay the minimum amount due on the credit card each month. A missed repayment will void the introductory offer and you’ll be charged standard interest rates moving forward, dramatically increasing the cost of borrowing.

Final Tip – Once your home improvements are complete, contact your house insurance provider to notify them of the work and ensure your policy is updated. Failing to do this could void your policy, which in turn would harm future claims you might make.