Using a personal loan to fast-track your home renovation

Using a personal loan to fast-track your home renovation

Time to give your house a revamp? Renovating can be a great way to add value to your home, or simply make it feel like a ‘home’ again. But before that, you may be faced with planned costs and unexpected price tags.

Now, saving the funds you need is not always possible, and that’s where a personal loan can help. Here are some tips to help you get your renovation projects off the ground.

Why a personal loan, and not a credit card?

Using a credit card to fund your house renovation can be tempting. On the bright side, they usually give you access to available funds, fast. But on a less positive note, they often come with high interest rates, which can add up quickly if you don’t pay off your cards in full every month.

In short, unless you know you can commit to a strict repayment plan and stick to it, putting renovation costs onto your credit card can easily turn into a long-term headache.

A alternative is to consider your personal loan options. Unlike credit cards, personal loans allow you to access the funds you need at competitive interest rates, and with the repayment plan that’s suited to your needs (now and over time).

Making a renovation loan work for you

Set a budget

Applying for any loan requires a fair share of budget planning, so it’s important to know your numbers ahead of time.

Of course, like any form of construction, it can be hard to forecast and keep control of renovation costs. Which is why having a clear plan is so important, and a good way to start is to create a budget for your total project, including an estimated overspend.

If you have a limited budget, you’ll also need to prioritise your renovation budget, using your goals as a guiding compass. Looking to sell for example? If so, what will suit your home, your location, and your target market? Which rooms will generate the best value-for-money?

Once again, keep your goals and budget top-of-mind. And remember, the most successful renovations are those that create value. Knowing how much you’ll likely spend (and possibly overspend) will help you work out how much equity you can expect to gain.

Choose the right repayment rate

Once you’ve built a realistic budget (factoring in all income and costs), the next step is to understand how quickly you can pay off your personal loan. You can get some estimates today by using our handy online calculator.

Choosing the right duration and payment frequency is key to tailoring your personal loan to your needs. Rather than monthly repayments, for example, you might like to align your loan with your pay, and opt for fortnightly or weekly instalments.

Make ‘flexibility’ your focus

As you’ll know, skipping payments can impact on your credit record and undermine your future borrowing power. That’s why, when choosing a repayment schedule, it’s always better to be sensible than sorry.

Having said that, your circumstances may change, or you might find that the loan structure you chose was, in fact, too cautious.

If you realise that you have more funds available (a second source of income, a windfall, an annual bonus etc.), why not putting part of them into paying off your loan? Paying extra means paying faster, which leads to paying less in interest overall.

Of course, how you do this depends on your situation: you can choose to increase the amount of every repayment, or make extra payments (regularly or as a one-off). It’s up to you. But before you take action, make sure that you know what your personal loan agreement entails. Are there any early-repayment fees involved? Would those override your savings?

Smart budgeting, flexibility, and a manageable repayment schedule – as you’ve seen, these are all key things to consider when structuring a personal loan for renovation. If you’d like to learn more about your options, feel free to reach out to us. Give the team at LoanSpot a call on 0800 666 022 or simply apply here.

Apply online

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure the content is correct, the information provided is subject to continuous change. Please use your discretion and seek independent guidance before making any decisions based on the information provided in this article.