How to Get a Home Improvement Loan with Bad Credit

What Exactly Are Home Improvement Loans?

A home improvement loan is simply a personal loan that you use to spruce up or renovate your home.

Just like loans designated for debt consolidation or buying a car, you can use home improvement loans to enhance your living space.

You get the full amount upfront and then pay it back with interest through monthly instalments over a set period. You’ll come across two main kinds: secured and unsecured loans.

Secured Home Improvement Loans

When you take out a secured home improvement loan, you’re putting up an asset, like your car, house, or home equity, as a safety net for the lender, just in case you can’t keep up with the repayments. 

This means if you fall behind, the lender can take the asset to get their money back. In some cases, this could even mean selling your home to cover the debt, especially if the loan is secured against your home equity.

Though it sounds risky, the good side is that lenders might offer you more money or lower interest rates, since they have the security of the asset.

Unsecured Home Improvement Loans

In contrast, an unsecured home improvement loan doesn’t tie any of your assets to the loan agreement. So, if you miss repayments, the lender can’t just take your property.

But, beware, failing to repay the loan might prompt the lender to take legal action, potentially involving bailiffs or a charging order, which could still put your assets at risk.

Can You Get a Home Improvement Loan with Bad Credit?

Yes, it is possible to get a home improvement loan with a bad credit score. These loans are often called “bad credit home improvement loans“. 

However, lenders may charge higher interest rates and offer lower loan amounts to people with bad credit, as they are seen as a higher risk.

It is important to weigh the pros and cons carefully before applying for a home improvement loan with bad credit. If you are unsure whether this is the right option for you, it is a good idea to speak to a financial advisor.

Here are some tips for getting a home improvement loan with bad credit:

• Compare different lenders to find the best deal.
• Be honest about your financial situation and don’t try to borrow more than you can afford to repay.
• Secure the loan with an asset, such as your home. This will make the loan less risky for the lender and may increase your chances of approval.
• Consider getting a guarantor for the loan. This is someone who agrees to repay the loan if you cannot.

What Can You Do with a Home Improvement Loan?

A home improvement loan can be used to fund a wide range of projects, from small cosmetic improvements to major renovations. Some examples include:

• Redecorating one or more rooms
• Installing a new kitchen or bathroom
• Adding a conservatory or extension
• Converting your loft
• Improving energy efficiency with insulation, double glazing, etc.
• Making repairs to your roof or other exterior features
• Adding landscaping features such as a patio or driveway

Home improvements can not only make your home more comfortable and enjoyable to live in, but they can also add value to your property. This can be beneficial if you are planning to sell your home in the future.

Who Can Get a Home Improvement Loan?

When it comes to getting a home improvement loan, each lender will have different rules. But, generally, they’ll consider things like:

• Your age, usually being at least 18 or 21 years old
• Whether or not you own a home, with or without a mortgage
• Your current debt and income
• Your credit rating, which reflects your past money and debt management

Your lender will use all this information to determine your loan eligibility.

What Credit Score Do You Need for a Home Improvement Loan?

Lenders use different criteria to assess loan applications, so there is no single credit score required to qualify for a home improvement loan. However, a credit score between 650 and 700 could increase your chances of approval.

Even if your credit score is slightly below this range, you may still be able to get a loan if you can secure it with an asset, such as your home. This reduces the lender’s risk and makes it more likely that they will approve your application.

How to Get a Home Improvement Loan with Bad Credit?

Getting a home improvement loan with bad credit is not guaranteed, but you can increase your chances of approval by following these tips:

• Look for home improvement loans specifically for people with bad credit. However, be sure to check the representative APR (annual percentage rate) carefully.
• Start saving money before you apply. This will help you reduce the amount you need to borrow.
• Work on improving your credit score. You can do this by following the tips in the previous section.
• Don’t apply for multiple home improvement loans at the same time. This can damage your credit score.

A good broker can be a game-changer. They can guide you through the process and give you tailored advice, pinpointing lenders who offer the best deal for you. With their knowledge of the market, they can save you time, stress, and money.

If you want to start your journey without hassle, send an enquiry to us. We’ll match you with the right broker who can help you get the best deal for your financial circumstances.

Which Lenders Offer Bad Credit Home Improvement Loan?

Specialist lenders are more likely to offer bad credit home improvement loans than traditional banks and building societies. Here are a few examples, but availability may change:

• Ocean Finance
• Likely Loans
• Pegasus Personal Finance
• Norton Finance
• Upgrade
• One Main Financial
• Net Credit
• Avant
• Lending Point

Please note that these are just examples, and you should explore all available options before making a decision.

Factors to Consider When Comparing Home Improvement Loans

Before you compare loans, make sure that the lenders you’re considering are authorized and regulated by the Financial Conduct Authority (FCA). You should only borrow money from legal lenders.

One of the most important things to consider is the interest rate. This is the amount of money you’ll pay in interest on the loan. 

Loans usually have a representative APR (annual percentage rate), which is the rate that at least 51% of borrowers get. This will give you an idea of how much interest you’ll pay, based on the amount you want to borrow.

Other factors to consider include:

• The loan term (how long you have to repay the loan)
• The repayment amount (how much you’ll have to repay each month)
• Any fees associated with the loan

If you’re considering a home improvement loans calculator, try to use the calculator below to get an idea of what your monthly repayments might be. 

[Embedded Home Improvement Loans Calculator]

While these figures provide an estimate, it’s wise to consult with a loan advisor who can help you grasp the full picture, inclusive of all potential fees and costs. This way, you can make an informed decision that aligns well with your financial goals and circumstances.

Getting help with bad credit

If your poor credit history is preventing you from getting personal loans or other forms of credit, you may want to seek help from a debt charity. They can offer free advice and help you find ways to manage your debt.

Here are some of the things a debt charity can help you with:

• Understanding your debt and how to manage it
• Creating a budget
• Negotiating with creditors
• Finding debt solutions such as consolidation loans or debt management plans

If you are struggling to manage your debt, it is important to get help as soon as possible. A debt charity can help you get back on track and improve your credit score.

How Can You Improve Your Credit Score in the UK?

There are many things you can do to improve your credit score, each with a different level of impact. Here are some of the most effective strategies:

• Register on the electoral roll. This helps credit agencies to identify you and can give your score a small boost.

• Check your credit report for errors and correct them. Around one in three people have errors on their credit report, which can negatively impact their score. Make sure to review your report regularly and correct any inaccuracies as soon as possible.

• Wait for payment defaults to be removed from your record. Payment defaults are removed from your record after six years. If you have defaults that are approaching this timeframe, it may be worth waiting until they are removed before applying for a loan.

• Keep your credit utilisation rate low. This is the percentage of your available credit that you are using, especially for revolving credit such as credit cards. Keeping your balance well below your credit limit shows lenders that you are a responsible borrower.

Alternatives To Home Improvement Loans

If you’re looking for ways to finance your home improvement project, here are some options to consider:

Extend your current mortgage

You could ask your lender for a further advance on your mortgage. This means increasing your mortgage debt, but you may be able to get a lower interest rate than on other types of loans. 

This could be a good option if you’re planning energy-efficient upgrades, such as installing solar panels or a new boiler. But be aware that lenders will still do credit and affordability checks, and there may be fees involved.

Remortgage

You could remortgage to a new lender for a higher amount than you currently owe, and use the extra money to pay for your home improvements. 

This could spread the cost over a longer period and make it more affordable, but you may pay more interest overall. You’ll also need to factor in the potential costs of early repayment charges and application fees.

Use an overdraft or credit card

If you only need a small amount of money, you could use an overdraft or credit card. This could be a good option if you can pay off the debt quickly to avoid interest charges. 

If you have bad credit, you may be able to get a credit builder card. These cards typically have higher interest rates and lower credit limits, but using them responsibly can help improve your credit score.

Borrow from friends or family

If other options are not available, you could consider borrowing money from friends or family. This can be a good way to avoid high-interest rates, and you may not need to do a credit check. 

But it’s important to have a written agreement in place outlining the repayment terms, even if the money is not a gift.

Which option is best for you will depend on your circumstances. It’s important to compare different lenders and options before you make a decision.

The Bottom Line

In conclusion, home improvement loans offer a practical way to finance your desired changes, big or small. Whether you have an excellent credit history or face challenges in that department, options exist to accommodate your circumstances. 

Partnering with a loan broker can streamline the process, ensuring you find the best fit for your needs.

Ready to take the leap? Get in touch with us. We’ll match you with an experienced loan broker who can help get the right choice.