Home Improvement Loans

How do home improvement loans work?

Home improvement loans, also known as house renovation loans, are a way for homeowners to pay for renovations, repairs and upgrades to their properties.

If you’re considering applying for a home improvement loan, first work out exactly what improvements or renovation work needs to be done. Getting quotes from builders, electricians and plumbers will help determine all the work that is required and how much you will need to borrow. 

Home improvement loans work like this:

1. Apply for a home improvement loan online: The process of applying for one of our credit union loans is done entirely online; you don’t need to speak to anyone - however, if you have any questions before you apply, you can talk to a member of our team Monday to Friday, 8 am to 6 pm on 0203 375 0221.
2. Get approved: If your application is approved, you’ll be issued a loan agreement from the credit union, outlining the terms and conditions of your loan, including the interest rate, repayment period, and any fees associated with your home improvement loan. 
3. Use the loan to make improvements to your home: Once you receive the loan, you can then use the money to pay for your home improvements. It’s important to keep track of your spending and stay within your budget.
4. Repay the loan: You'll need to make regular monthly repayments. It's essential to make your repayments on time to avoid defaulting on your home improvement loan and damaging your credit rating. 

What can you use a home improvement loan for?

The best home improvement loans can be used for a wide variety of house renovations, including;

1. Repairs: e.g. fixing a leaky roof or replacing your boiler. 
2. Renovations: e.g. remodelling a kitchen or bathroom, building a patio, or converting an attic space. 
3. Energy-efficient upgrades: e.g. installing new windows and doors, adding insulation, or buying more energy-efficient appliances.
4. Landscaping: e.g. creating a garden, building a fence, or installing a sprinkler system.
5. Installing accessibility equipment: e.g. ramps, grab bars, widening doorways, or adding a chair lift.

How much will a home improvement loan cost?

Home improvement loan rates will depend on how much you need to borrow to improve your home, your credit history and your loan's annual percentage rate (APR). 

APR helps you to work out the cost of your loan over an entire year, including interest and fees. The credit unions we work with don’t charge arrangement fees, but other brokers, credit unions or lenders may do. 

You can use our loan calculator to explore how much your monthly repayments could be on a home improvement loan. 

What credit score is needed for a home improvement loan?

The credit union’s we work with design home improvement loans for borrowers with “Fair” or better than fair credit scores.

The UK's three major credit reference agencies (Equifax, Experian and TransUnion) all have different scoring methods, but borrowers fall into one of the following categories.  

• Bad
• Fair
• Good
• Excellent

A fair credit score falls between 439-530 out of 1000 for Equifax, 566-603 out of 710 for Transunion and 721-880 out of 999 for Experian.  

Your credit score is influenced by how you've previously managed credit, for example, making your credit card repayments on time and settling loans. 

You can check your credit score for free using the Experian, Clearscore and Credit Karma websites. Check all three to get an overall idea of your credit rating. 

If you discover your credit score is ‘Bad’, there are several things you can do to help improve your score. These include;

• Checking your credit report: It's important to know what's on your report because it will give you an idea of how lenders view you as a borrower. 
• Paying your bills on time: An important factor that affects your credit rating is your payment history. Late payments can harm your credit score.
• Reduce your debt: Try paying off as much debt as possible before making new credit applications.
• Using your credit responsibly: It's good to use credit products to help build your credit rating, but it's important to use it responsibly. Avoid reaching your credit card limit or taking on more debt than you can afford. Aim to keep the amount of credit you use compared to your credit limit below 25%.
• Only apply for new credit once in a six-month window: Every time you apply for new credit, your application is recorded as a hard search on your credit report. If you make too many applications for credit in a short space of time, it can put off potential lenders and harm your credit score.

Improving your credit score will take time - it's not something you can do overnight, but by following these steps, you can gradually improve your credit rating and increase your chances of being approved for home improvement loans in the future.