Property refurbishment includes improving the appearance of a residential or commercial building. It is done in order to either make the building more tailored to your needs or increase the value of your property to earn good profits by selling it.
One generally takes property refurbishment loans to improve houses, hence called home improvement loans. If you have decided to renovate your house due to any reason, you will have to start setting my money right away.
It takes months or years to have enough money saved for doing up your house. As it requires an inordinate amount of money, chances are you will need to take out property refurbishment loans. These loans are unsecured loans but allow you to borrow a large amount of money.
The repayment duration of these loans can extend up to five years. Various online lenders are out there that invite applications for these loans, giving you an opportunity to fund your savings shortfall. Undoubtedly, you will have your work cut out to save up the entire cost of your improvement project, but it will likely take forever.
Thanks to online lending, property renovation loans are easily available even to those who have a bad credit rating. However, there are a lot of factors you need to pay heed to before putting in the loan application form.
Factors to consider before taking out property refurbishment loans
Here are the factors you should consider while seeking property renovation loans:
Look at your budget
Supposed, the estimated cost of your home improvement project is about £10,000, and you have half of the savings with you. You may think that you should fund the rest of the cost with funding sources. This is not the right way to decide whether or not you should borrow money, and if so, how much.
As you are to pay interest over and above the principal amount, you cannot decide your budget just based on the principal amount. First off, you should know how much money you need to invest in the improvement of your property.
Deduct your savings from the estimated amount, and then use the online calculator to know how much interest will be levied on an average. As this is just the estimated amount, leave a buffer in your budget in case you need more than the estimated cost.
Likewise, the actual cost is usually higher than the calculated one, so include the cost for extra payments as well. Now you have got to know how much you will likely need.
The next step is to look over your budget to see if you have enough money to stick to monthly payments. Chances are you will whittle down unnecessary expenses but make sure you do not have to compromise with your essential expenses.
You are capable of building an emergency cushion
While it is paramount to scrutinize your budget to ensure you have enough money to make debt payments as well as meet your regular expenses, it is crucial to ensure you will be capable of popping money into your emergency cushion.
You cannot stop stowing away money for unforeseen expenses as you can be caught unawares at any time. Having no money in an emergency cushion will be troublesome for you when you come up with unforeseen costs.
You will end up borrowing money from online lenders. It will be more expensive because of interest payments. It can be toilsome for you to handle small debts with property refurbishment loans.
These loans will be a favourable option when you do not struggle to meet your regular expenses and build an emergency cushion.
Secured vs unsecured
Depending on the borrowing funds, these loans can be secured and unsecured. These loans become secured when you put collateral. Secured improvement loans will allow you to borrow a large amount of money.
Some lenders do not allow these loans to be unsecured when you are to borrow more than £5,000. Secured property refurbishment loans are generally secured against that property, which means you will likely lose it when you fail to pay down the debt on time.
Interest rates will be lower in the case of secured property renovation loans, and that is why they are more manageable than unsecured refurbishment loans. You should decide beforehand what type of loan will be ideal for you.
Analyze all pros and cons of both types of loans carefully and then decide what will be the best method.
Alternatives to property refurbishment loans
It is likely that you do not qualify for property refurbishment loans, or you may find them expensive. You do not need to be dejected as you can seek other alternatives. For instance, if you have a bad credit rating, you will likely get a deal with a higher interest rate, or the lender may turn down your application.
In such a scenario, you should seek same day bad credit loans. Since these loans particularly aim at bad credit borrowers, you will easily get approval. Not always, you will need a large amount of money to renovate your property.
If that small amount comes within the range of your credit card limit, it can be an ideal choice for you. However, you will have to pay off the balance as soon as the bill is generated. Try to have a credit card that allows you to pay down in instalments. In order to avail of this feature, a good credit rating is mandatory.
The bottom line
Property refurbishment loans are undoubtedly expensive. You should carefully analyze your repaying capacity, so you do not regret it later. As the duration of these loans can be long, take into account your futuristic financial situation.
You must be able to make payments even in tough circumstances. Whether you take out secured or unsecured property renovation loans, in both cases, you should seek alternatives because sometimes they can be much more affordable.
Do not ignore your credit rating because this decides how much you will be paying as interest. By the time you save money, try to build your credit score.