The complete guide to secured home improvement loans

Home improvements can help you get more enjoyment out of your property and increase its value at the same time. You can spread the cost with a home improvement loan, making renovations more affordable.

7 min read
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Are home improvement loans secured?

Some, but not all, home improvement loans are secured. Either way, you pay back the loan (plus interest), on a monthly basis over a fixed period.

With a secured loan, you use an asset (such as your home) as collateral. This means the lender could repossess your asset if you fall behind with the repayments. 

This gives lenders an added layer of security. As a result, they may lend you higher sums of money with lower interest rates, compared to unsecured loans.

How much can I borrow for renovations?

The amount you can borrow for renovations depends on a number of factors, including:

  • Your credit history - a good credit history gives you a better chance of borrowing more money, at lower interest rates
  • Your affordability - the lender will check you can afford the loan repayments on top of your other monthly outgoings
  • The lender’s criteria - which varies from company to company
  • Type of loan - you can typically borrow more with a secured loan as there’s less risk involved from the lender’s point of view

It’s important to only borrow as much as you can afford to repay, to avoid financial difficulties. If you borrow more than you need, you’ll pay more interest overall. But if you don’t borrow enough, then you may be forced to take out another loan to cover the costs. 

Benefits of a secured loan for home improvements

  • Borrow more with lower interest rates compared to unsecured loans 
  • Don’t need a good credit score or large income
  • Spread repayments over several years

Considerations of a secured loan for home improvements

  • A poor credit history may increase interest rates
  • You need to pay on time, every time to avoid repossession
  • A longer loan term means more interest overall

Tips for getting a secured loan for renovations

If you’re interested in getting a secured loan, we’ve got some tips to help.

1. Check your credit score

Before you apply, check your credit score for free with the three main credit reference agencies in the UK: Experian, Equifax and TransUnion

You can also check your Equifax credit report through our member-only platform CredAbility. You can do this for free as many times as you need, without it affecting your score.

If you spot any errors (like spelling mistakes or an old address for example) then you should contact the lender and/or the agency to update it. 

Remember to make sure the details on your loan application and credit report match and are accurate. Lenders will check both sets of information when you apply. If it all matches, it’ll show lenders that you are who you say you are. This should give them more confidence to lend to you.

2. Check if you really need to renovate

Home renovations can be exciting, but also costly and time-consuming. So before you start, consider if there are any easier and cheaper ways to update your home.

For example, you could improve your home on a budget by upgrading bathroom fixtures and fittings, instead of replacing the whole suite. Or you could update your kitchen, without breaking the bank, by painting cupboard doors and improving the lighting. These small changes could make a big impact and save you thousands of pounds. 

3. Plan home improvements carefully

When you apply for a home improvement loan, the lender will ask how much you want to borrow. So it’s a good idea to get some quotes from reliable tradespeople and/or structural engineers

Once you’ve got your quotes, you’ll be less likely to overestimate or underestimate how much money you need. Plus, you can weigh up if it’s affordable and prioritise the work accordingly.

When deciding what work you want to be carried out, consider how much value it would add. Bear in mind, properties usually have a ceiling price, meaning the value won’t rise beyond a certain point.

4. Check affordability

Review your income and outgoings and calculate if you can afford to repay a loan each month. Remember to take future financial plans into account.

If your loan is secured, the lender could force the sale of the asset it’s secured against to claim back lost funds. This is usually a last resort if you fell behind with repayments.

5. Calculate how much equity you have 

Equity is the difference between the current market value of your house and how much you owe on your mortgage. The more equity you have, the more you may be able to borrow against your property.

If your house is worth £250,000, for example, and you have a mortgage balance of £125,000, you have 50% equity. In other words, you own 50% outright. Exactly how much you can borrow depends on the lender and your individual circumstances. 

Are there any other borrowing options?

Before you apply for a secured loan, check if you can save money using a different form of borrowing.

1. Remortgage

Remortgaging means replacing your existing mortgage with a new one. You could stay with your current provider, or switch lenders. People tend to remortgage if they’ve found a better deal, or they want to borrow more money. 

For example, if you’re a homeowner, you could remortgage to raise money for home improvements. 

Be aware that borrowing additional money with a remortgage will increase your monthly mortgage payments. It also increases the amount of interest you’ll pay. Plus, you may face early repayment charges if you leave before your contract ends (depending on your terms and conditions). 

So you’d need to weigh up the cheapest way to borrow more money once these factors are taken into account.

Tip: As with a secured loan, your home is used as collateral. So make sure you can afford the extra borrowing (plus interest), to avoid the risk of repossession. 

2. Credit card

A credit card may be more suitable if you only need to borrow a small amount over the short-term. As long as you maintain your repayments on time, every time, you can use it to improve your credit score and eligibility. 

The amount you can borrow and the interest rates you’re offered will depend on your individual circumstances and the lender’s criteria. There are lenders who specialise in providing credit cards for those with bad credit, though they tend to charge higher interest rates and lower credit limits. 

How to apply for a secured home improvement loan?

These are the steps you need to take when applying for a secured home improvement loan:

1. Compare quotes

You can compare quotes from numerous loan providers online, using comparison websites. Or you can use a broker or independent financial advisor. This will help you find the most suitable deal for you. It may also be a good idea to get quotes directly from lenders, as not all of them will be on comparison sites.

Each lender follows different application processes, but most will allow you to apply online or over the phone. We suggest you use eligibility checkers to see if you’re likely to be accepted before you apply. These tools will only carry out a soft search of your credit report, so they won’t affect your credit score. In fact, you can use them as many times as you like.

2. Submit an application

Each lender will have different application processes, but most will allow you to apply online or over the phone. They will want to get a full picture of your financial circumstances to see if a secured loan is affordable for you. So you will need to provide them with details including (but not limited to): 

  • Income and outgoings
  • House value and equity
  • The amount you want to borrow
  • The loan term

3. Space out your applications

Remember to space out credit applications. Otherwise, you could give lenders the impression that you are struggling financially. Plus, each time you make a formal application, it can cause your credit score to temporarily dip. This could make it more difficult to get approved for a loan in the future.

Find a home improvement loan from £1,000 to £500,000

  • No up-front fees
  • Personal and homeowner loans available
  • Check your eligibility without impacting your credit score
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We're a credit broker not a lender. Homeowner loans are secured against your home.