When you are a homeowner, the need for home repairs can arise when you least expect it. An emergency fund can help cushion you from the resultant financial blow. However, if you do not have a few thousand pounds in cash stashed away, hold off panicking when you notice a crack in your wall or your drain gets clogged. In today’s competitive lending market, it is relatively easy to find a lender to finance your home repairs.
Here is a quick rundown of some of best options for borrowing money to cover your home repairs.
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1. Low- or 0%-interest credit card
For less costly home repairs, you can opt for the sheer convenience of plastic, particularly if you can pay the amount off quickly.
The best card in this scenario would be one with a low or even a 0% introductory rate for purchases. There are several 0% credit cards in the UK worth exploring. If you have a solid credit score, your chances of getting approved for a 0% credit card are good.
However, it goes without saying that before taking out a credit card to finance home repairs, it’s good to first confirm your ability to pay on time each month and to clear the balance before the introductory period ends.
2. Home equity loan
If you have equity built up in your home, you can borrow money against this to finance costly home repairs.
‘Home equity’ refers to the difference between your home’s current market value and the amount you owe on your mortgage. For example, if your home’s current market value is £250,000 and your mortgage balance is £150,000, you essentially have £100,000 in home equity. You can use a portion of this money as collateral for a loan to finance home repairs.
One major advantage of home equity loans is that their interest rates are quite reasonable. Like credit card debt, however, these loans can be dangerous if you are not a disciplined borrower. You might incur harsh penalties for late or missed repayments, with the worst being the repossession of your home. Late and missed payments can also tank your credit score. It might, therefore, be wise to work out a repayment plan before you apply for a home equity loan.
3. Personal loan
A personal loan is another viable way of borrowing money to finance costly home repairs. Personal loans are offered by banks, credit unions, and savings and loan associations and are a quick way to drum up cash. With a sufficient income and a decent credit score, you can get a personal loan in a few weeks.
One major drawback of personal loans is that they come with high interest rates. Different lenders will, however, charge different rates, so it might be a good idea to shop around and compare the rates on offer. Your regular bank may give you, as an established customer, a better rate than another lending institution that does not know you. Also, if you are a member of a local credit union, you might be able to get an inexpensive personal loan.
The key with personal loans is to pay them off sooner rather than later; otherwise, the high interest rate could make your home repairs expensive.
4. Home improvement loan
Home improvement loans are available from banks and credit unions and have one main advantage: speed.
Other loans, such as home equity loans, take a lot of time to process, and it can be several weeks before you actually lay your hands on the money. Home improvement loans, on the other hand, require no appraisal, and the paperwork is also minimal.
One possible drawback of these loans is that interest rates might be a little higher than those of home equity loans. The repayment term might also be a few years shorter, translating to higher monthly repayments.
5. Mortgage refinancing
Converting your old mortgage to a new loan is another option for financing costly home repairs.
This option particularly makes sense if the mortgage interest rates on offer now are several percentage points below your current mortgage rate, and if you have a sizeable amount of equity in your home (if your home’s current market value is greater than the amount you owe). More home equity means that you will be able to borrow more.
Mortgage refinancing can also be a good option if the home repairs you are undertaking will actually add notable market value to your home.
Finding a lender to finance home repairs is quite easy today. Many lenders are willing – or should we say eager – to lend you enough to cater for your home repair needs. What’s hard, however, is sifting through these lenders’ ever-growing menu of options to find out what works best for you. Each of the available financing options has its pros and cons, but if you carefully analyse your individual circumstances and your financial needs, you may find one that is a good fit.