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Financing home improvements

If you want to make some improvements to your home but you don’t have enough saved to pay for the work upfront, you may be wondering how you can finance the work. One option is to cover the cost with a credit card and pay this back in affordable monthly instalments. In this guide we’ll take you through how this works so you can make an informed decision. 

“A loan may be a better option than a credit card as the interest rate may be lower and the repayments more manageable...”

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What home improvements are you hoping to do?

The cost of home improvements can vary vastly depending on the project you have planned. For example, building a conservatory will obviously be a lot more expensive than redecorating a room. As a result, the way you choose to finance these projects may differ – if the cost will be high, perhaps because you’re building an extension, a loan may be a better option than a credit card as the interest rate may be lower and the repayments more manageable.

However much you want to borrow, you need to be confident you’ll be able to pay it back: if you make partial or late payments, or miss payments altogether, you may incur extra charges and you’ll damage your credit history. This will make it harder and more expensive to borrow in the future.

With a credit card, you must make at least the minimum payment every month to avoid getting a missed payment notice on your credit history, but try to pay more than this if you can afford to – just paying the minimum could mean it takes years or even decades to clear your debt because of the interest it will accumulate.

For instance, if you spend £1,000 on a credit card with 34.9% APR and make just the minimum payment each month (in this example, the minimum payment is 3% of the balance or £5, whichever is greater) it will take you over 30 years to clear the debt. This is because, as your minimum payment amount decreases as you pay more of the balance off, the interest charges will continue so you’d end up paying £4,031 in interest on top of the £1,000 you borrowed!* And that’s assuming you don’t borrow more on the card in the interim.

*http://www.moneysavingexpert.com/credit-cards/minimum-repayments-credit-card 

 

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Pros of paying for home improvements with your credit card

If you pay for your home improvements with a credit card you’ll be able to fund the work even though you don’t have the money you need readily available, and then spread the cost over a period of time, which can make it easier to afford.  If you do decide to spread the cost over a few months you should still try to pay off as much as you can afford each month, as this will mean you’re paying as little interest as possible.

Should the cost of your home improvements come to more than £100, there’s a further benefit of paying with a credit card – your purchases will be protected by Section 75 of the Consumer Credit Act.

Read part 2 of our guide to find out what Section 75 is and other things to consider. 

 

Know if you're accepted before you apply with QuickCheck

  • Get credit - up to £1,500
  • QuickCheck won’t affect your credit rating
  • Get a fast response in 60 seconds

34.9% APR Representative (variable)
Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender

Check Now