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What’s the best way to borrow for home improvements — a secured loan, a personal loan or remortgaging?

You have a few options if you'd like to borrow some money to improve your home. Which one is best for you depends on your circumstances and what you want to do.

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If you’d like to improve your home this summer, but you’ve not got the savings to hand to pay for it, or you want to spread your costs by borrowing some money there are many different options available to you.

Two of the most common ways to borrow are secured loans and remortgaging, we see how they stack up.

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Compare a range of secured loans for different borrowing amounts.

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What is a secured loan?

A secured loan (or second charge mortgage) is a loan that uses the value of your home as a security for the loan.

This gives lenders the confidence to lend large sums at relatively low rates, but bear in mind your home is on the line with a secured loan, so make sure to borrow responsibly.

How much can you borrow with a secured loan?

You can compare rates for secured loans up to a maximum loan size of £150,000 on uSwitch, though you may be able to borrow a larger amount if you talk to a loan broker directly.

Borrowing larger sums should be approached with caution, as if you struggle to meet repayments your home could be repossessed.

What can you use a secured loan for?

You can use a secured loan for whatever purpose you want, once the cash is in your bank account it’s yours.

However, it’s generally prudent to use the money for something that will give you a return, or provide long term value and use.

For example, home improvements are a typically considered a good use of secured loan funds as you’re putting value back into your home.

Hopefully if you come to sell your home you’d have generated more than enough value to repay your secured loan (though be wary of early repayment charges if this is your plan).

However, this is not a guaranteed bet, as homes like any asset can fluctuate in value, so always be prepared to repay the loan long way with monthly repayments.

What is remortgaging?

Remortgaging is the process of repaying an existing mortgage debt with a new mortgage. This is typically done to save money with a lower interest rate, or to raise money by borrowing against equity.

If you want to borrow against the value of your home to get a loan, you can take out a larger mortgage than you need to repay your current debt.

 

How much can you borrow by remortgaging?

The amount you can borrow will depend on meeting affordability criteria and how much equity you have in your home.

Generally, it’s not wise to remortgage to a significantly larger loan amount than your existing mortgage. Obviously, the more you borrow the more your mortgage will cost you.

What can you use money borrowed from remortgaging for?

You can use the money for anything you like from holidays through to a new car or a wedding.

But despite remortgaging being one of the cheapest ways to borrow money (without the hassle of taking on more debt with additional loans and cards), it’s still debt that should be used wisely, often people invest the money back into their home.

As you can often borrow a large sum of money it can be a good way to pay for more expensive home improvements, such as extensions or conservatories.

Could a 0% credit card or personal loan be what you need?

Personal loans allow you to borrow up to £50,000 and repay it over a fixed term of one to ten years.

The monthly repayments are fixed and they don’t require any security, as they are offered against your credit score. However, this does mean you typically need a good credit score to get the best deals for loans.

 

Credit cards can be repaid more flexibly and many don’t charge any interest at all for the first couple of years. If you want a card for making buying materials or paying a contractor that accepts cards, then a 0% purchase card could be worth looking at.

 

If you need a few thousand pounds worth of cash, then a 0% interest money transfer card could be of interest, which will allow to transfer money from the card into your bank account to spend as cash.

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