So you’re thinking of renovating your house? Whether you’re considering a cosmetic change or a more extensive makeover, there are several different options available to fund the costs. Let’s take a look at some of the options, and the pros and cons of each for your needs.
Applying for a personal loan
If you’re looking to renovate your house, applying for a personal loan may be the right option for you. While interest rates on a personal loan are usually higher than a mortgage, they are generally lower than a credit card.
But remember: the thing with renovations is that they often go over budget and can take longer than anticipated. When deciding how much you need to borrow, make sure you factor in potential budget overruns. And don’t hesitate to talk to us: personal loans often have a maximum amount the lender will lend, and based on what you need, we can help you find the right lender for you.
Using your savings
Using your savings means you are not borrowing money, and therefore not paying interest. However, saving the amount you need can take longer than anticipated, and can delay the benefits of your renovation.
While it’s true that, with a personal loan, you will pay interest on the money you borrow, keep in mind that capital gains from your improvements may offset the interest you pay, without compromising your nest egg.
Using a credit card
Credit cards are easy to use, and if you have a zero balance, you can take advantage of the interest-free period. But generally speaking, the interest rate is much higher than a personal loan or mortgage option, and depending on the cost of your renovations, you may be unable to pay it off in full in the interest-free period.
The other thing to note with credit cards is that it can be tempting to only pay the minimum payment each month, which means you will end up paying more interest, and have a debt for longer than you would if you had a personal loan with a finite term.
Redrawing on your revolving credit mortgage facility
A revolving credit facility allows you to spend whatever is available, up to your approved limit. Using a revolving credit facility has the additional advantage of allowing you to control your spending, rather than the lender.
In addition, by using a revolving credit facility, you won’t have to pay interest on the full amount you need for your renovations right from the start; you only pay interest on what you owe.
However, having and using a revolving credit facility may mean you keep going up to your limit, which will cost you more in interest over the term. Used well, the revolving credit facility may be a convenient option, but if you decide to go down this route, having a good financial discipline will be very important.
With so many choices of how to finance your renovation, it can be hard to know which option is best for you: convenience, discipline and the amount you are borrowing are all key factors to consider.
If you would like to look at personal finance options to fund your renovation, talk to the team at Motor Vehicle Finance today – we’re not just about car finance! Contact us on 0800 666 021: we’re here to help.