How to choose the right loan for your 2019 home renovation project

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When you own a property, there will inevitably come a point when it needs an upgrade. If you have enough money to cover the costs, that’s great! But for many, a loan is likely to be the best route to take. That’s why we’ve asked Phillip Garlick, Head of Commercial at H&T, to explain what you need to consider if you’re looking to take out a loan to renovate your home in 2019.

If you’re thinking about taking out a loan to complete some renovation projects on your property, there’s some key information you’ll need to know. Not all loans are the same. Lenders often offer a wide array of options for term length, interest rates, charges, and fees. As with anything, finding the best deal comes down to comparing various lenders and products.

This is important, as the loan you choose will determine how much you have to pay each month, ultimately affecting how much you pay back over the lifetime of the loan. The wrong decision can end up costing you much more than you otherwise would have paid. With that in mind, I’ve put together this article to help you make the right decision.

What to look for

Every lender is different, and each one will be willing to offer you different terms. That’s why it’s important you take your time and compare each of the various offers available to get an idea of which one might be the best. Broadly, there are three main areas you want to consider when assessing which loan is right for you: the amount of money you will borrow, the interest rate, and the terms of the loan. The best way to choose is to compare the three criteria below across lenders and products, and then apply it to your needs.

Loan amount

The amount of money you will be allowed to borrow is based on a number of factors, but lenders will typically offer you a minimum and a maximum loan amount they are prepared to lend. Some lenders might require a certain minimum income that must be met to get accepted for a specific loan, while others will want to see proof you can afford it. If you aren’t accepted, it is wise to seek a lower loan amount or consider asking a close relative to be a guarantor.

Interest rates

Lenders are required to provide you with an annual percentage rate (APR), which combines the standard interest rate on the loan with all other costs of borrowing, such as fees and charges, allowing you to determine the overall cost of the loan to you. The rate you are offered will vary from lender to lender but you will generally pick the loan with the lowest APR.

Loan term

The term of the loan determines how much time you have to pay it off. The longer the term, the lower the monthly payments typically are, but the more you will pay back overall. If you plan on taking out a longer-term loan, you’ll need to find out whether there are penalties for making early repayments. If there aren’t, it can often be wiser to take it out over a longer term and pay back early when you can.

How much should I borrow?

When taking out any loan, it is always wise to stay well within your budget. Your financial situation can change very quickly, and one bit of bad luck, such as a job loss or an unexpected illness, could see you struggling to keep up your payments. If you don’t keep up to payments on your loan, your home could be repossessed. For this reason, it’s sensible to take a lower loan amount and stay within what you can afford. It doesn’t matter how good the deal you can find is if it ultimately ends up costing you your home.

You now have all the information you need to make a wise decision and choose the best loan. However much you decide to take out and whichever company you go for, I wish you all the best in your property renovations in 2019.


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