Is it Right to get a Personal Loan for Home Improvements?
If you need or want to do improvements on your home, then you may consider getting a personal loan to help you pay for it. However, borrowing can feel like it is not the right solution for a number of reasons. It is good to think this decision through as there are many things you need to consider.
Do I really need the work done?
Initially you should be considering whether you really need the work to be done. Some home improvements might be vital such as repairing a leaky roof or replacing damaged parts of the home. However, often we will update things such as our bathrooms or kitchen and this will not be so necessary. It can have a positive effect on us, as it is nice to have more modern things and perhaps they are more convenient or work better, but if you are borrowing money to pay for them, you are taking on risk and extra expense. You therefor have to decide whether you feel that it is worth it.
Can I wait and save up?
An alternative solution is to wait and save up to do the work. If it is just modernisation then this should be fine, but if you need to repair damage that will get worse if you do not get it sorted out quickly then there will not be time to wait. If you have savings though, it could be better to use instead of borrowing money as this will be less risky and less expensive. If those savings ate earmarked for paying for a specific thing, perhaps a vacation, then you may not want to part with them. However, it will be a lot cheaper to use the and then start saving again – perhaps savings the amount you would have had to repay each month on a loan. It may take a lot less time than you think to replenish your savings this way and you will not have to borrow money.
Which is the right loan?
It is really important to make sure that you choose the best loan to suit you are your needs. There are many available and it can be quite daunting knowing which one you should choose. It is worth doing research though as it can make a big difference. There are a selection of factors that you should be considering.
- Cost – it is likely that you will want to get a loan that costs the least possible. However, comparing loans on cost is not always that easy. This is because loans do not always advertise in the same way. Many will just advertise their interest rates, but you may have to pay additional fees as well, perhaps admin or setup fees. This means that when you just compare interest rates you are not taking those fees into account which can differ quite significantly between lenders. It can therefore be worth contacting lenders to find out how much the actual cost of the loan will be and then you will be able to compare them better.
- Repayments– it is also really important to make sure that you will be able to afford the repayments. You will usually need to repay a certain amount each month. Therefore, you should find out exactly how much you will be repaying each month and then work out if you can afford this. Look back at your checking account statements to see whether this is an amount that you would normally be able to afford. Also see whether there are any areas where you could cut down in case you do have difficulty in affording it. Decide whether you think that the repayments will be easy or difficult to manage.
You will often find that if you take out a loan which has a short term and therefore not so many repayments, the repayments will be higher, but if you have a loan where the repayments are spread over a longer time period, they will be cheaper. However, if you take longer to repay a loan it will usually be more expensive as you will be charged more interest. You have to decide whether you are prepared to pay more for the luxury of being able to repay over a longer time. Having smaller repayments will also reduce the risk that you will not be able to afford to repay and so this could be worth paying extra for, especially if you are unsure as to whether you will be able to afford a higher amount.
- Lender – you may have certain criteria that you feel make a good lender and you may want to apply these as well. Perhaps customer service is important, that they come recommended or that they have good reviews. Consider what might be important to you and that will help you to pick the most suitable one for you.