Great numbers of us yearn to do certain things in our lives that may not be realistically possible unless we can get a quick cash injection from somewhere.
It should hardly be a massive surprise, then, that a lot of people consider taking out a loan as a way to fund home improvement work, such as redecorating, remodelling, or even something as major as converting the loft or having a house extension built.
However, if you have a less-than-immaculate credit history, you might be wondering whether you have any chance of obtaining a suitable loan to help pay for your desired home improvements.
The short answer to the question we posed at the top of this article is:
Yes, it could definitely be possible for you to be granted a loan for improvement work at your humble abode, even if you do have poor credit. However, there are certain important things to bear in mind.
While it's possible, obtaining a loan with bad credit comes with its challenges and higher interest rates. It's crucial to assess your financial situation and consider the implications carefully.
Various types of loan exist that could help you fund home improvements
Broadly speaking, there are two types of loan that you might consider if you are interested in borrowing money for home improvements; a secured loan or an unsecured one.
Failing to keep up with repayments on a secured loan can lead to losing your home. It's vital to consider your ability to maintain repayments before committing.
Secured Loans
As the term suggests, a secured loan is typically secured against something, and this type of loan also being known as a “homeowner loan” gives a clue as to what asset it is often tied to: the borrower’s home.
Certainly, you could consider this type of loan if you are a homeowner, especially if – as someone with bad credit – you are anxious to try to keep the interest rate on the loan as low as possible to help ensure affordability.
As the lender will have an asset it can take possession of in the event of you failing to keep up with your repayments, you might find that you are able to obtain a secured loan with quite an attractive interest rate.
But on the other hand, if you are borrowing money in order to fund home improvements, you might not want to create a situation where you risk losing the very thing you are trying to improve in the event of, for example, you losing your job.
Remember, failing to keep up with repayments on a secured loan can result in losing your home. Always consider if you can afford the repayments before securing debts against your home.
Could an unsecured loan be the best way to pay for your home improvement work?
Unsecured loans are also frequently referred to as “personal loans”. This type of loan might be an especially alluring and suitable option if you only need to borrow a few thousand pounds to cover the home improvement work (which may be the case if you have found an alternative way of paying for much of the work, only to still be slightly short of the entire amount you require).
And of course, an unsecured loan is exactly that – unsecured. It won’t be secured to any assets, so you won’t be at risk of losing that asset (or at least, not directly) if you later find yourself struggling to repay everything you owe on the loan.
However, it is at this point that we return to the theme of poor credit. If you have a bad credit score, and there isn’t any asset the lender is permitted to reclaim in the event of you falling behind with repayments, you might find yourself being presented with very high interest rates for an unsecured loan. This would be the lender’s way to guarding against the risk of you failing to repay them (bearing in mind that in these circumstances, the lender will perceive you as a ‘riskier’ person to lend to).
Nor should it be overlooked that as someone with bad credit, you might struggle in many cases to get a lender to present you with a loan offer at all.
There is, though, one potential remedy to this you might consider: turning to lenders that specialise in bad credit loans. Some of those lenders feature on our own panel of lenders here at CashCompare. So, if you fill in and submit our straightforward no-obligation quote request form, you could quickly get a good idea of what kind of unsecured loan could be possible from such lenders.
Specialist providers of bad credit loans serve people who may have been turned down for a loan by other lenders. So, you never know – that longed-for home improvement loan may be more attainable for you than you might think!
CashCompare is authorised and regulated by the Financial Conduct Authority (FCA), ensuring our commitment to providing fair and transparent advice. This article is for informational purposes only and does not constitute financial advice.
"Warning: Late repayment can cause you serious money problems. Always consider if borrowing is the right option for you and ensure you can repay your loan." For help, go to moneyhelper.org.uk.