The advantages of a secured loan

Secured loans come with numerous advantages, including:

• Fixed interest rates.

• Borrowing money and paying it back over the years.

• Being able to fund home renovations without relying on credit cards.

• Great deals from lenders due to the security they receive.

• Increasing the value of your home.

Am I eligible for a secured loan?

The great thing about secured loans is their flexibility, but not everyone is eligible for one. If you meet the following criteria, you should be able to get the loan you want:

• Are you a homeowner? – Lenders use your equity as an asset, so renters aren’t eligible for these loans.

• Do you have viable equity? – If your mortgage is high, you won’t have enough money to pay for the renovations.

• Are you willing to make the monthly repayments? – While secured loans are flexible, lenders still want to ensure you can make the monthly payments on time.

The differences between secured and unsecured home improvement loans

Many people struggle to choose between secured and unsecured loans, but homeowners can access both. While secured home improvement loans rely on you offering your home as an asset, unsecured personal loans are available to everyone.

However, personal loans aren’t as accessible as they might seem. Lenders often have stricter eligibility criteria, as unsecured borrowing doesn’t offer the same security.

Here are the main differences between both loan types.

Loan amount

Secured loans can exceed £100,000 in some cases – as long as you’ve built up enough equity in your property. Unsecured loan amounts are usually much smaller, as lenders are less likely to offer a lot of money with limited security.

However, if you’re redecorating, then it might make more sense to borrow a smaller amount of money than get a secured loan.

Interest rates

Lenders value security because it allows them to recover their money. For this reason, the interest rates tend to be lower with secured loans than with unsecured borrowing.

Secured lenders are also more likely to base their interest rates on your personal circumstances because they can recover the money through your home if needed. In contrast, personal loan providers have to call in the bailiffs and take people to court.

Repayment duration

When funding home improvements, you’ll also need to consider whether you want to repay the money quickly or enjoy an extended repayment period. Secured loans tend to last longer than unsecured loans, and most people pay them back over years instead of months.

However, you might want shorter repayment terms if you only borrow a small amount. It depends on how you want to handle the loan, but most agree that secured borrowing gives them more breathing space.

Can you commit to the repayment period?

A home improvement loan could give you more financial security in the future, but you also need to commit to monthly repayments.

Defaulting on loan repayments could land you in legal trouble, so while the loan might seem like a great idea, you must also be aware of your responsibilities.

What’s your credit rating?

Another positive of secured loans is they don’t require an excellent credit score – but lenders will still factor yours into their final decision. For example, if you have a poor credit history, you might be unable to borrow as much money.

A good credit history will open up more opportunities, and you might also receive better interest rates.

Are your financial circumstances stable?

Are you in stable employment and know things won’t change for the foreseeable future? It could be a great time to get a home improvement loan. However, the risks of losing your job or facing financial hardship can mean you can’t make the monthly payments.

Consider whether you’re confident about the future and ensure you can afford the loan before signing on the dotted line.

Do you understand the risks?

The biggest risk of defaulting on a secured loan is possibly losing your property. Lenders will recover their money in any way possible, so it’s essential to be aware of the risks.

Your property isn’t the only thing that will suffer, as not paying back money may impact your credit rating.

A bad credit score may take a long time to rebuild, and you might find fewer borrowing opportunities in the future.

Is an alternative borrowing solution better for your needs?

Secured home improvement loans are one of many ways to borrow money – although your options depend on your current financial circumstances. 

Here are some alternatives to consider.

Home equity loan

These loans are similar to home improvement loans because it’s a debt secured against your property.

The main difference is that home equity loans can fund anything, but home improvement loans offer better rates because lenders know how you’ll use the money.

HELOC

If you’re unsure how much you’ll need to borrow, a home equity line of credit could be a good solution.

These loans are ideal for building a new home because there’s a draw period instead of receiving the money upfront.

Credit cards

Credit cards can also be OK, but many people avoid them due to the high-interest rates. Spending on a credit card can get you into serious debt, and most have limits that won’t fund major renovations.

Savings Account

Of course, if you have money saved, there’s nothing wrong with using it. However, you’ll use most of your savings and won’t have security during emergencies.

Get access to specialist lenders

Most mainstream lenders work with specific eligibility criteria; if a candidate doesn’t tick each box, they don’t offer the loan. Brokers have access to specialist loan providers and are more likely to view your case individually.

Zero upfront fees

Accessibility is our thing, and we go out of our way to find you a loan that suits your needs. As part of our commitment to customer experience, we add our small fees to your loan, so you don’t need to worry about immediate payments.

Work with an award-winning team

Our award-winning brokers have worked tirelessly, finding each client the perfect loan. Property owners can have confidence in Believe Loans, and we’ll always go out of our way to give you the best selection of lenders.

Support through the application process

Once you find a suitable lender, we’ll support you through the loan application and talk you through the process. You don’t have to worry about a thing, and successful applicants can have the money in their account relatively quickly.

Find the right home improvement loan today