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Home Improvement Loans – Pros, Cons and FAQs

Uncover the pros and cons of financing a home improvement project with a home improvement loan. We look at the different types of home improvement loans and answer your most asked questions. 

Welcome to our guide on home improvement loans – a tool to change your house into your dream home.

We understand that you might be worried about debt or the possible outcomes of a secured loan. You’re not alone. In fact, over 6,900 people visit our website each month to learn about secured loans.

This guide is here to answer your questions and put your mind at ease. We’ll cover:

  • The costs of home improvements and how to compare quotes.
  • Different types of home improvement loans and how they work.
  • The benefits and downsides of a home improvement loan.
  • How to apply for a home improvement loan, even with bad credit.
  • Other ways to pay for home improvements, such as remortgaging.

We’re here to help you understand home improvement loans. So, let’s start learning together.

How much do home improvements cost?

On average, it costs between £40,000 and £80,000 to completely renovate a three-bedroom house in the UK

But this may not be accurate for your home improvement project because the overall cost will hinge on a wide variety of factors. 

The cost will greatly depend on the extent of your project. For example, financing a house extension is likely to cost more than putting in a new bathroom.

Step One – Compare Quotes

Researching how to fund your home improvement project will always throw up questions. Do you want to remortgage or get a loan? Can you afford it? etc…

The problem is, you can’t answer those questions until you’ve got a reliable quote.

Fill out the short form below to access the best, accurate home improvement loan rates from the UK’s leading lenders.

Get your free home improvement loan quote by answering below.

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How much do you want to borrow?


Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable.


Typical 10.8% APRC variable

Can I borrow money for home improvements?

Yes, you can borrow money to pay for home improvements and it can be one of the easiest types of loans to get approved. 

Most people don’t have the capital to pay for large-scale home improvements with their savings, so instead they turn to the various home improvement financing methods.

Some of the most common borrowing methods to finance home improvements are:

  1. A home equity loan
  2. A mortgage further advance
  3. Remortgaging
  4. Home Equity Line of Credit (HELOC)
  5. A home improvement loan

What is a home improvement loan?

A home improvement loan is a loan approved to help homeowners complete renovations or improvements to their property. 

A home improvement loan could help to fund cosmetic changes or to finance bigger and more expensive property improvements, such as a loft conversion. 

Most home improvement loans are secured, which means the property itself will be used as collateral in the loan agreement. But the benefit of the loan benign secured is that you can usually borrow a more significant amount of credit, which is ideal for home renovation projects. 

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How do home improvement loans work?

A secured home improvement loan works by allowing the homeowner to borrow against some of their available home equity to finance home improvements. 

The amount borrowed will be paid to the homeowner as a lump sum payment and subject to a (usually fixed) interest rate. 

The secured home improvement loan will then be paid back through monthly loan repayments lasting for a fixed period until all of the loan and interest have been repaid. You can choose to pay back the loan early but may incur early repayment fees. 

Secured home improvement loans and home equity loans are highly identical and can sometimes be the same loan marketed differently. 

What is an unsecured home improvement loan?

An unsecured home improvement loan is a type of personal loan for home improvement purposes, whereby you don’t need to list an asset as collateral within the credit agreement. 

This means the lender won’t have an automatic right to sell your property to recover the debt if you don’t repay it. But it also means your borrowing power is likely to be much less than secured home improvement loans.

If your borrowing power is limited with an unsecured home improvement loan, it may not be enough to give you the finance required to fund larger renovations, unless you’re combining the borrowing with savings. 

How do unsecured home improvement personal loans work?

Unsecured home improvement loans work the same way as secured home improvement loans by providing a lump sum loan and requiring monthly repayments for a fixed repayment period. 

The only difference is if the loan wasn’t repaid. Secured loan providers can force the sale of the property to get their money back, whereas unsecured loan lenders would need to take legal action to make you pay. 

How much can I borrow for home improvements?

The amount you can borrow for home improvements will depend on the type of loan you’re using. 

You can usually borrow significantly more if you use a secured home improvement loan or another type of secured loan – such as a home equity loan – rather than an unsecured home improvement loan. 

If you’re using a secured home improvement loan, your borrowing power will be partly determined by the amount of equity you have in your home. The more equity you have the more you are likely able to borrow. 

Home improvement loan calculator

A home improvement loan calculator can assist you in realising how much you could be able to borrow. And it can help you understand how much you will be expected to repay each month using the lender’s APR. 

It’s worth using home improvement calculators, but don’t rely on them entirely!

Which bank is best for a renovation loan?

The best home improvement loans are typically those that offer the lowest interest rates, which are subject to change. Therefore, it’s important to state the best home improvement loan at all times.

For further guidance on this topic, consider checking out our Best Home Improvement Loan page. 

What are the advantages of a home improvement loan?

A home improvement loan could help you complete the home improvements you’ve been dreaming of, but they might not be the best option for everyone. 

Here is a list of the pros of secured and unsecured home improvement loans:

  1. You may be able to borrow more money than generic personal loans (secured type)
  2. You may be able to borrow with a lower interest (secured type)
  3. You can apply online easily (secured and unsecured)
  4. They can help you increase the value of your home, and thus, increase home equity (secured and unsecured)

What are the disadvantages of a home improvement loan?

It’s important to be aware of the drawbacks when using secured or unsecured home improvement loans, namely:

  1. ​​You could lose your home (predominantly secured type)
  2. Availability is subject to status and your credit rating (secured and unsecured)
  3. Missing repayments will damage your credit score (secured and unsecured)

Who can apply for a home improvement loan?

To apply for a home improvement loan, you will need to be at least 18 years old, a permanent UK resident and own a property. 

You’ll then need to meet further home improvement loan criteria, such as having enough equity in your home if you’re applying for a secured loan. 

What you can’t use your loan for

Home improvement loans should be used to make cosmetic or large-scale improvements to your property. They shouldn’t be used for other purposes. 

Is a loan the best way to pay for home improvements?

Using savings is the best way to pay for home improvements because you won’t need to pay interest to finance your project

However, leveraging your equity to make home improvements is still a good option for most homeowners. There are many products to help you do this, including secured home improvement loans, home equity loans, HELOCs and even remortgaging. 

Even though you’re borrowing money and creating a debt, you are likely to be improving the value of your asset at the same time, which will increase your home’s value and your equity.  

Can I borrow more on my mortgage for home improvements?

Yes, it’s possible to extend your current mortgage to fund home improvements if you have sufficient home equity. You will need to ask your mortgage provider for additional borrowing called a further advance to do this. 

Your home equity is the amount of value you own in your home, which can be calculated by subtracting your existing debt secured against your home away from its current market value. 

For example, owning a £200,000 home with a £100,000 outstanding mortgage gives you 50% home equity equal to £100,000.

It’s possible to borrow against some of your home equity to receive a cash lump sum to pay for home improvements. This money would then be paid back within your remortgage payments and could mean it takes longer to pay off your mortgage entirely. 

Can I remortgage to pay for home improvements?

Yes, it’s sometimes possible to switch mortgages and simultaneously extend your borrowing if you have sufficient home equity. This will give you a cash lump sum which could be used for a range of purposes, including home improvements. 

Is it cheaper to remortgage or get a home improvement loan?

It’s sometimes cheaper to get a secured home improvement loan over remortgaging – and vice versa. It really depends on the current market and interest rates on offer. 

But there might be other fees to consider when weighing up these two options, which we have discussed in our home improvement loan vs remortgaging guide.

It’s highly unlikely to be cheaper to use an unsecured home improvement loan over remortgaging because unsecured loans tend to have higher interest rates than secured lending.

Which loan is best for a house that needs improvements?

Home improvement loans, home equity loans and HELOCs are all worth considering when needing to finance a home improvement project. There is no single best option as the best will depend on personal circumstances and real-time market conditions.

However, it’s worth noting some of the unique benefits of using a HELOC. Unlike other loans, a HELOC provides you with a drawdown facility rather than a lump sum loan. 

By using a drawdown, you benefit from staging the loan in line with the different stages of your home renovation project. This can make project budgeting easier. And you only pay interest on the money drawn, rather than the whole loan at once.

On a separate note, if you’re buying a property that needs considerable renovations, also known as a fixer-upper house, you may want to consider a home renovation mortgage instead of the above.   

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Can I get a home improvement loan with bad credit?

It’s possible to get a home improvement loan with bad credit, and it’s even more likely if you use a secured home improvement loan. Listing your home as collateral in the agreement reduces the lender’s risk, so your credit score won’t hold as much weight in the application. 

There are even special products for homeowners with a poor credit history called bad credit home improvement loans. They might have higher interest rates, however. 

Can I get a joint home improvement loan?

Yes, you can get a joint home improvement loan. Both applicants will be subject to the lender’s criteria and a credit check. 

What are the alternatives to a home improvement personal loan?

Some of the alternative methods of financing home improvements have been discussed within this guide, such as home equity loans and remortgaging. But there are others, including using a generic personal loan for home improvements

For a wider breakdown of options, head to our main borrowing information page. 

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