A personal loan is a great option to fund smaller home improvement projects (from $4000) as they have lower interest rates compared to credit cards. If you chose an unsecured loan you do not have to provide collateral against your loan, so there is no risk of losing your home or equity should you default on payments. A variable rate loan also allows you to make extra payments to minimise the term and save on interest.
How does a Personal Loan for Home Improvements Work?
This loan application can be done 100% online and the loan can be approved within 24hrs. Funds received from an unsecured personal loan can be used for any reasonable purpose provided you are financially eligible. After you’ve drawn up a budget for your home improvements you can apply for a personal loan. If you are approved, you will receive a lump sum into your account to use as you wish, pay plumbers, buy paint or DIY.
Primary advantages of a personal loan are that interest rates can be fixed for the duration of the loan. Personal loans for the purpose of home improvements are A simple and cost-effective way to fund home improvements.
Personal Loan for Home Improvements Options
If you are looking to improve or renovate your home, there are a few options you may want to investigate.
If you have an existing mortgage the possibility exists to increase your mortgage amount to finance the improvement you would like to make on your home. Some home loans have a redraw facility and if you have made extra payment you could use these extra funds.
Unsecured personal loans historically have higher interest rates mainly because this type of loan is classified as higher risk because of the lack of collateral provided. An unsecured loan can be used to fund anything you would like to do, such as a family vacation, a car or home renovations. Typical borrowing amounts range from $5000 up to $30,000. Unsecured personal loans have loan terms varying between one and seven years and can be fixed or variable.
A line of credit personal loan can provide you with a convenient way to draw on funds as and when you need to up to a pre-determined limit. No charges are made against your total balance only on the funds you withdraw, and you are only charged interest on what you owe not on the total balance. Once you’re approved ,the funds are there for you to use when you need them.
Last option would be a secured personal loan. A secured loan allows you to borrow higher amounts for longer with lower interest rates and at a fixed rate for larger projects. This loan will require a guarantee against your loan or assets as collateral for the loan to be approved. You are able to use the equity in your home if you have a mortgage or use your home as security. The danger in this agreement is that should you default on payments the lender can foreclose on your home to recoup his funds.
Personal loan for Home Improvements Interest Rates and Fees
Every lender will assess each application against their own lending criteria. To obtain a rate your credit history and loan risk will be reviewed. These Rates can vary between 6.99% and 26.95% p.a. so you’ll get a rate that’s tailored to your individual circumstances.
Each lender has their own administration costs but in general, they will include a once off establishment fee and ongoing monthly management charges.
To start the initial loan application process, you will need the below documents:
- Proof of income
- Proof of identity- you need to be over the age of 18 years old
- A permanent resident of Australia
- A good credit rating
How to Apply for a Personal Loan for Home Improvements
Most people start online by comparing different lender rates and filling out an online application form. The application will require qualifying documents to be submitted such as proof of ID, address, proof of income, employment details as well as information regarding your assets, debts and liabilities.
Advice, Tips and Considerations
We are often asked how to compare home improvement loans and while this is very personal and dependant on the application and purpose of the loan there are a few distinguishing features that you can compare.
Loan cost, fees, rates and charges are straightforward to compare, pay attention to upfront costs as well as ongoing administration fees. Some loan types are structured with high interest’s rates and longer terms research the key features of each loan to make sure it suits your needs
Matching the purpose of the loan with the loan features. Some loans are designed specifically for renovations or extensions look at the specialist features of each loan to decide if they suit your exact needs.
Repayment structures are critical, and you should make sure the terms and flexibility of repayments suit your income.
Frequently Asked Questions
If my circumstance changes how flexible is the home improvement loan?
Personal loan terms are generally between one and seven years, you will want a loan that can accommodate any changes in your personal circumstances during that time. Make sure your loan is flexible in that you can settle early, make extra payments and change loan terms to suit your change in situation.
What happens if I apply for the incorrect amount?
This is a difficult question because if you borrow too much the principal amount is impacted by the interest rate and could cost you a lot more than anticipated. Too little and it may be difficult to access another loan when you have one outstanding and a half complete project. It’s important to budget and re-budget covering all possible scenarios.
Am I restricted to using my loan funds for certain things?
There on no restrictions on what you can use your home improvement personal loan funds for whether you want to renovate the bathroom or paint the shed provided the activities are legal
What is the difference between an interest rate and a comparison rate?
Australian law states that companies need to display an interest rate as well as a rate inclusive of fees and charges so that all loans can be compared on a fair basis.