Compare secured home improvement loans April 2024

If you're looking to fund home improvements, it’s possible to use the equity you already have in your property to get a loan.

Your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured on it.

Whether it’s renovating your kitchen, making much-needed repairs or putting in a swimming pool (lucky you), home improvements are rarely cheap. It can be difficult to find the spare funds to cover the cost of improvements, especially if you’re still paying off your mortgage.

But if you’ve already built up equity in your home, you can use it as collateral to apply for a secured loan. You can then use the funds from this loan to cover the cost of your home improvements.

To help you work out whether a secured home improvement loan is right for you, here’s what you need to know.

years
£
£
Name Product Maximum LTV Loan amounts Loan terms Overall cost for comparison Repayments
Pepper Money Prime Rate Secured Loan
60%
£7,500 to £350,000
3 to 30 years
7.4% APRC
£536.11
(£70,766.49 overall)
Together SPECIALIST BTL 1ST CHARGE
75%
£30,000 to £2,500,000
4 to 30 years
8.3% APRC
£568.11
(£74,990.12 overall)
Pepper Money Prime Rate Secured Loan
65%
£7,500 to £1,000,000
3 to 30 years
7.6% APRC
£544.96
(£71,934.22 overall)
Pepper Money Prime Rate Secured Loan
60%
£7,500 to £1,000,000
3 to 30 years
7.6% APRC
£546
(£72,072.3 overall)
Pepper Money Prime Rate Secured Loan
60%
£7,500 to £200,000
3 to 30 years
7.8% APRC
£540
(£71,280.34 overall)
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What is a secured home improvement loan?

A secured home improvement loan, or homeowners loan, is a type of loan that requires you to use the equity you own in your property as security against the loan’s cost.

Because this security reduces the risk for the lender, you can usually borrow a larger sum of money compared to an unsecured loan – typically upwards of £25,000. Loan terms are usually longer too, say up to 25 years or even longer, and interest rates are often more competitive. This can make secured loans a good option for expensive home improvements.

However, secured loans should always be considered with care because if you fail to make your repayments, your home could be at risk. In the very worst cases, the lender could sell your property to recoup its money, so you must be confident you can make your loan repayments before agreeing to anything.

How do I choose the best secured home improvement loan?

When comparing secured home improvement loans, consider the amount needed for renovations, as borrowing more increases repayment. Higher property equity enhances borrowing potential. Evaluate the loan term—opting for a longer term lowers monthly payments but increases overall interest. Do some calculations to work out which is the best option for you.

Factor in the interest rate (fixed or variable), as variable rates may fluctuate. Be aware of potential fees, such as arrangement or product fees, early repayment fees and broker fees. Some lenders require a valuation fee for property assessment.

Additionally, it’s crucial to assess your ability to afford potential fluctuations in interest rates, especially with variable-rate loans. It’s best to inquire about any prepayment penalties and broker fees, as they can impact the overall cost of the loan. Before finalising your decision, make sure you understand the terms and conditions to ensure the loan aligns with your financial goals.

Can I get a secured home improvement loan with bad credit?

Yes, you should still be eligible for a home improvement loan even if you have bad credit. However, the loan amount offered might be smaller, and you might have to pay a higher interest rate than someone with a good credit rating.

The advantage of a secured loan is that it uses your existing equity as security, so lenders are more likely to approve your loan on this basis. Your credit rating will have less of an impact on whether you’re approved than it would with an unsecured loan.

Pros and cons of secured loans for home improvements

Pros

  • Interest rates can be more competitive compared to unsecured loans
  • You can usually borrow a larger sum of money
  • Longer, more flexible loan terms, which means monthly repayments can be lower
  • You might still qualify if you have bad credit

Cons

  • You could be forced to sell your house if you fail to repay the loan
  • Loan amount is limited by amount of equity you have
  • Fees apply
  • You’ll need a good credit score to get the best deals
  • Interest rates can be variable, so if rates increase, you’ll pay more

Who offers home improvement loans?

You can get secured home improvement loans from a range of specialist providers and lenders, including:

Many large banks and lenders also provide home improvement loans, though these are generally offered as unsecured loans:

What to keep in mind with a secured home improvement loan

With a secured loan, you’ll generally be able to borrow more than you would with a personal, unsecured loan, which means it may be more suitable for those looking to carry out expensive home improvements. However, the amount you can borrow will be limited by how much equity you have in your house. You’ll usually need to have at least 20% to 25% equity, but the more you have, the better.

You can work out how much equity you have in your home by dividing your mortgage’s outstanding balance by your home’s current market value. This gives you your loan-to-value (LTV) ratio. If your LTV was 80%, you’d have 20% equity.

The cost of home improvements and renovations can also vary dramatically, so it’s important that you have a firm idea of the likely cost of improvements before you apply for a loan. If you borrow less than you need, you may need to take out an additional loan to cover the expenses, and if you borrow too much, you’ll likely end up paying more in unnecessary interest.

Home improvements can help increase your home’s market value, but you would not realise any of this potential value unless you were to sell the property. Consider carefully whether it’s worth getting into debt and risking the equity you have in your home just to make improvements and whether those improvements justify the loan’s cost.

What are the alternatives to secured home improvement loans?

Unsecured personal loans. If you don’t have enough equity in your house to cover a loan, you could consider an unsecured loan to fund your home improvements. An unsecured loan does not require any asset to be used as security, so it’s less risky for you. However, because it’s a higher risk for the lender, interest rates tend to be higher than secured loans. You also won’t be able to borrow as much – typically between £1,000 and £25,000 – and loan terms are usually between 1 and 7 years.

Credit cards. If your home improvements are only a few thousand pounds, you might be able to put this on a 0% purchase credit card and spread the cost of your monthly repayments interest-free over several months. The best purchase credit cards offer 0% periods for almost 2 years, but you must aim to clear your debt within that time. Otherwise, interest kicks in at a much higher rate.

Frequently asked questions

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables is provided by Moneyfacts.

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