What You'll Need to Get a Loan for Home Improvement
Banks and building societies competing for their share of the secured loan market are offering some of the best deals we've seen in a long time. That's good for property owners hoping to get a loan for home improvement. It is also good for the financial services industry inasmuch as a healthy loan market means they are doing well.
Assuming you want to make home improvements yourself, there is no shortage of loans on offer. A quick perusal of offers using a comparison site shows just what's out there. We encourage you to take a look if, for no other reason, than to see that you can borrow significant amounts of money to make needed repairs or upgrade your home to make it more comfortable.
Should you decide to apply for a secured loan for home improvement, there are some things you'll need to have in place first. These are all listed below.
Enough Equity in Your Property
The whole concept of secured loans is predicated on the borrower having enough equity in his or her home to raise the necessary financing. Just as a reminder, equity is the difference between the value of a home and the outstanding balance of the owner's mortgage. A homeowner with Â£100,000 remaining on a property valued at Â£150,000 has Â£50,000 in equity.
Lenders typically loan up to a certain percentage of the available equity. This is known as the loan-to-value (LTV) ratio. LTVs dictate that it is nearly impossible to borrow 100% of the value of your home. Therefore, you have to have enough equity to raise the kind of financing you need for your desired improvements.
Sufficient Income to Cover the Loan
Lenders are required to exercise more scrutiny in the aftermath of the housing crash. In light of that, borrowers are subject to more strict requirements for proving they have sufficient income to cover the loan they are applying for. In short, you'll have to be able to prove you can afford to borrow.
Borrowers with a steady job and a stable employment history should have no trouble. Most lenders accept several pay statements and a bank statement as proof of income. If you're self-employed, you may be required to produce both bank and tax records as proof of income.
Fairly Decent Credit
One of the advantages of a secured loan is that the borrower doesn't have to have stellar credit to get approved. Offering equity as collateral provides the added benefit of being able to forgive some past credit blemishes. Still, you'll have to have fairly decent credit in order to get a sizeable secured loan for home improvement.
Whatever lender you apply to will do a thorough credit check using standard resources. That credit check will provide information relating to your current debt load, the creditors to whom you already owe money, any history of judgements and late payments, and so on. Rest assured that your chances of being approved are greater the better your credit is.
One last note in this regard: it's not a good idea to immediately apply for a new loan if you are turned down by the first lender you apply with. Lenders are required to document the reasons for rejecting a loan application, so they may have vital information about credit report errors or other things you can correct.
If you're looking for a loan for home improvement, you can rest assured there are plenty of deals on offer. You should have no problems if you have sufficient equity, sufficient income, and a fairly decent credit history.
Instantly compare 950+ of the UK's best secured loans
Rates from as low as 3.75%