How Do Home Improvement Loans Work?
If you’re looking into renovating your home, chances are you’ve come across home improvement loans while exploring your financing options. However, you may not know exactly what a home improvement loan is. To find out how a home improvement loan works, and why it could be the right choice for you, read on.
What is a home improvement loan?
Put simply, a home improvement or home renovation loan functions the same way as a personal loan. At a loan provider like Nectar, this means you’re not forced to provide stacks of paperwork, nor do you need to go through a valuation process; both of which are common when borrowing from banks.
Instead, Nectar streamlines the process so you can get approved and access your credit all on the same day. There are a number of advantages to going about lending money this way, and quick access to your funds is only one of them.
Why is a personal loan a good option?
When you get a personal loan to fund your home renovation plans, the benefits are extensive. Beyond the fact that you can get renovation capital fast and get started straight away, you’ll also be able to fine-tune the loans terms to suit you. That means finding a competitive interest rate, and putting together a repayment plan that you can adapt to fit your budgeting constraints.
Another reason you’ll want a personal loan over taking out a second mortgage comes down to utility. Refinancing your home loan to pay for renovations means you need to borrow the money against the value of your property. Taking out a separate, unsecured, fixed-rate loan isn’t based on your property value—instead, it’s based on your credit score. This means you’re free to use the loan however you want, no strings attached.
For example, this can come in handy if—while your renovations are underway—you suddenly need to deal with small repairs as well as renovations.
How to use your budget best
There are a few things you can do to ensure you get the most bang for your buck. All it takes is a little planning and forethought, and some strategy during renovation, and you can get your budget to go a lot further than you might suspect.
To start with, we’ll cover what you should know before you knock down any walls. First, it’s best to have a solid plan of all the work you plan to carry out, as knowing roughly how much your renovations are going to cost is a huge advantage. After that, cover your bases by adding around 10 per cent more, in order to make sure you have a safety net for anything that might come up unexpectedly.
There are two more things you can do to save yourself some time and effort earlier on. One: if the renovations you’re making are specifically because you want to sell the property, make sure that that they’re adding as much value as you think they are! There’s nothing worse than spending a lot of money on your property, and then finding out you don’t stand to make back what you spent.
And two: double-check your property insurance, as your insurance plan could potentially change as soon as you start work.
As for using the loan effectively, it helps to track all your spending so that your budget doesn’t disappear without you noticing. Beyond that, you’ll want to pay off your loan as fast as possible, to ensure that you’re not spending too much in interest.
Ready to take the next step?
Home renovations can be exciting if you’re well organised, and have an appropriate budget. No matter what your plans for your home are, they’ll be easier to achieve with help from Nectar. For the best loans has to offer, talk to the team at Nectar today.