Should You Get a Loan to Remodel Your Home?

There are plenty of reasons why remodelling your home might be a smart move, but if you don’t have enough money to pay for home improvements you will need to look at other options. But is borrowing money to remodel a property a sensible idea – or are there better ways to finance the project?

Reasons to Remodel

If your home is starting to feel a bit cramped or your kitchen is falling apart, one cupboard at a time, you might be tempted to move to a bigger and better property. But stop and think for a few minutes. Moving house is stressful and there are no guarantees you will be able to find a new home that is affordable and right for you. You will also need to sell your existing home, which is not always easy. And if you have kids, do you really want to uproot them from the neighbourhood?

Remodelling can make perfect sense and if you do the job right, it can also be more cost effective. Improving a property will usually add value to it, so when you do eventually come to sell, you will have made money on the cost of remodelling it.

Different Types of Finance

There are lots of ways to finance a home improvement project:

• Personal loans are useful if you don’t plan on spending too much money.

• Secured loans are more suitable for luxury home improvement projects such as home extensions or new kitchens.

• Re-mortgaging can work if you have equity in the property.

• Credit cards can be used to pay for smaller projects, but the interest rate will be higher.

• Cash is always a good way to finance home remodelling projects, particularly in the current economic climate where interest rates are low so savings earn very little.

When is a Loan a Good Idea?

Unsecured and secured loans are a popular way to finance home remodelling. Most lenders are happy to lend to customers with good credit ratings and with interest rates so low right now, it is an excellent time to borrow money. Secured loans are a better option if you need to borrow larger amounts of money because the repayments will be lower.

Reasons Why a Loan Could be a Bad Idea

Taking out loans to pay for home improvements is always a bad idea if you are up to your eyeballs in debt or your financial situation is currently very volatile.

Always make sure you can afford the repayments if you do decide to apply for a loan of any kind. Defaulting on a loan will seriously damage your credit rating and should be avoided at all costs.  If you don’t have a good credit rating but are confident you can afford the repayments on a loan, look at products offered by a bad credit loan provider. It won’t be a cheap way of borrowing money, but remodelling your home should add value to it, so in the long run the investment could be a smart move.