Secured home improvement loans are one option when you need credit to pay for a new kitchen, loft conversion or any other type of home improvement project. 

This is the guide for you if you want to know more about secured home improvement loans in the UK and related information.

Can you get a loan to do home improvements?

You can get a bank loan to help finance home improvements, whether it be a small redecoration project or whether you plan to knock down walls and transform spaces completely. There are many types of loans that can be used to complete home renovations, not least the aptly named home improvement loan

We’ll dive into the details of home improvement loans here and discuss some of the alternative loan options to complete home improvements towards the end of this guide. 

What is a home improvement loan?

A home improvement loan is a type of loan where the money must be used to complete home improvements. The homeowner(s) will be given a lump sum that can be used for the home renovations or improvements they want. The money is then paid back on a monthly basis with interest. 

By using a home improvement loan, you could increase the value of your home and by extension your home equity. 

Is a home improvement loan secured or unsecured?

A home improvement loan can be offered as a type of unsecured or secured loan. It’s essential that you understand the difference between these two types of home improvement loans. One typically offers lower interest but has a significantly bigger risk. 

Do you know which one? Read on to find out for sure. 

What is a secured home improvement loan?

A secured home improvement loan is a loan specifically used for home improvements with an asset listed as collateral in the credit agreement. The most common assets used to secure home improvements are properties and home equity. You may also be able to use a vehicle to secure a home improvement loan. 

By securing the loan you could get a loan amount beyond the typical £25,000 limit on an unsecured home improvement loan. 

If you do not keep up repayments when the loan is secured against your property or home equity, the lender can force the sale of your home to recover the debt. Any money raised from the sale will be used to pay your mortgage first (if you have one), then the secured home improvement loan provider. Any remaining funds will be the debtor’s to keep. 

Only ever apply for secured home improvement loans with a lender that is authorised and regulated by the Financial Conduct Authority (FCA). 

Are secured loans easier to get?

Secured loans are typically easier to get approved than unsecured loans, which also applies to secured home improvement loans. The reason it can be somewhat easier to get these loans is that the lender is taking less of a risk. They can recover the loan through the collateral secured within the credit agreement. Your credit score and finances will still be assessed. 

However, just because a loan is unsecured doesn’t mean the lender cannot get their money back. They can even take you to court, ask for a CCJ and use bailiffs among other enforcement methods. 

What can secured home improvement loans be used for?

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A secured home improvement loan can be used for any project that would improve your home in the way you prefer. This includes anything from cosmetic home improvements, buying new furniture and appliances to more extensive building work. You could use a secured home improvement loan to install a new kitchen or bathroom, build a conservatory, knock down walls or convert a loft. 

As long as the money is genuinely used for home improvements there are very few restrictions – if any. 

What qualifies for a home improvement loan?

To qualify for a home improvement loan you will need to be a UK homeowner who lives in the UK on a regular basis. You may also need to be of a certain age. If applying for a secured home improvement loan, you’ll also need to own an asset that the lender will accept as collateral. In most cases, this means owning a home or home equity, sometimes a vehicle. 

The aforementioned makes you eligible to apply but it doesn’t necessarily mean you will be approved for the loan. The lender will apply its own affordability assessment to make sure you can repay comfortably. These checks include an assessment of your income against existing debts and your credit score. 

Secured home improvement loans – examples and options

To give you a snapshot of the secured home improvement loans available on the market right now, we’ve collated a couple of examples to look over. These are not the only secured home improvement loans to choose from in the UK and they are listed below as examples only. You should complete your own research and look for the most suitable loan for you.

  1. Freedom Finance will allow you to borrow more than £10,000 with a secured home improvement loan. Their current Trustpilot score is rated excellent.
  2. The Second Mortgage Company offers secured home improvement loans against property between £10,000 and £500,000 that can be repaid from between one to 30 years. 
  3. Evolution Money offers a similar product and will allow you to borrow up to £50,000 on their secured loan. 

Applying for a secured home improvement loan

You can search, compare and apply for secured home improvement loans online. When comparing your options, you can use home improvement loan calculators that give you an idea of what your repayments will be (including interest) based on the amount you need to borrow and how long you want to repay. 

These calculators do not account for personal circumstances and the rate shown is based on 51% of successful applications only. In reality, you may not be able to borrow the loan amount entered or repay over the timeframe requested. But above all else, you may be subject to a higher rate of interest. 

You may be able to circumnavigate this problem by getting a more personalised loan quote that doesn’t involve a credit check. 

Can I get a home improvement loan with bad credit?

When somebody has a poor credit rating, it tells the lender that the person has found it difficult to make credit and/or debt repayments in the past and maybe at present. It makes the individual a greater lending risk, and for that reason, the lender may either:

  1. Be reluctant to provide large credit
  2. Protect themselves by charging more interest
  3. Do both of the above
  4. Reject the loan application

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However, it is still possible to get a home improvement loan with bad credit. You can find lenders advertising these loans specifically for people with a poor credit rating. If you apply for a home improvement loan that is not specifically advertised for people with a low credit score, you should expect to be offered an interest rate above the representative example. 

Earlier in our guide we explained how a secured loan is somewhat easier to get over an unsecured loan. By choosing to take out a secured home improvement loan instead of an unsecured one, you could improve your chances of being approved even with a lower than average credit score. This is because the collateral reduces your lending risk. 

No assets? Consider a guarantor home improvement loan instead!

If you want a loan to complete home improvements but have a poor credit score and don’t have any assets or much home equity, you can consider using a guarantor home improvement loan instead. 

This is a variation of a secured home improvement loan but instead of using your assets as collateral, a guarantor becomes the collateral. The guarantor is forced to pay the loan if you don’t and they may have to list their own assets or property as collateral as well.

Most guarantors are partners or close family members.  

What is the best loan to take out for home improvements?

In this MoneyNerd guide, we’ve discussed a lot about secured home improvement loans. These types of loans might be the best option for you but they are not the only option. If you want to complete home improvements, you should also consider:

  1. Personal loans

Generic personal loans can be used to complete home renovations too. You can find unsecured and secured personal loans. Sometimes lenders offer home improvement loans which are just their personal loans advertised accordingly. So it is worth searching for these as well. 

  1. Credit cards

Credit cards can be another good option. Finding a credit card with a 0% interest rate for the first months or even a year can be a great way to fund home improvements at a lower cost. They may not be suitable if you need to borrow large amounts for a big renovation. 

  1. Home equity loans/Second mortgages

Home equity loans – also known as second charge mortgages – are loans that are secured against the home equity you have accumulated by paying back your mortgage. They could be highly similar to secured home improvement loans when also secured against home equity. It’s worth searching for these and comparing the repayment terms to what you are offered through a secured home renovation loan. 

If you are struggling to compare your options, you could employ the services of a commercial company, such as a credit broker. 

Can you get a personal loan to remodel a house?

Secured home improvement loans can also be used to remodel a house. Many people want to knock through walls to make their home more open plan. If you want to do this or change the layout of your home in any other way, you could consider financing the project with a home improvement loan. 

You could also use any of the alternative methods discussed just above, including a generic personal loan.  

Secured home improvement loans Vs home equity loans

A home equity loan is also frequently used to help finance home improvements. Some people struggle to understand the difference because on many occasions the differences are negligible. To help you understand how these two options may differ, we’ve just published our home equity loan vs home improvement loan guide

Give it a read before making a final decision!

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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