Improving your home can make it more comfortable, more energy efficient or better suited to a growing family. But a renovation is also a significant financial commitment, and the finance you choose will shape how much it costs you in the end.
V5 Solutions compares the main financing options below, setting out what each one suits and what to watch for. First, a worked example shows why getting the budget right matters before any borrowing decision.
A Worked Example: Budgeting for a New Kitchen
Priya and Tom want to replace their kitchen. The fitter's quote is £8,000 for units, worktops and installation. When they list everything else, the picture changes:
- New appliances: £1,500
- Electrician for extra sockets: £600
- Flooring and tiling: £900
- Contingency for surprises once the old kitchen comes out: £1,000
The real budget is £12,000, half as much again as the headline quote. They have £5,000 saved but want to keep £2,000 as an emergency fund, so they need to find £9,000. Choosing to keep their existing appliances for now brings that down to £7,500. Working through the full costs like this, before speaking to any lender, is the best protection against borrowing too much or too little.
Using Savings and Credit Cards
Savings
Often used by: people with savings beyond an emergency fund. There is no interest to pay, though you lose any interest the money was earning. Our guide on when to use savings rather than borrow explores this trade-off.
Credit cards
Often used for: smaller amounts that can be cleared quickly. Some cards offer an introductory 0% period on purchases. Once it ends, the standard rate applies, so have a plan to repay in time. A useful bonus is that, under Section 75 rules, the card provider can be jointly responsible if a purchase costing between £100 and £30,000 goes wrong.
Personal Loans and Remortgaging
Unsecured personal loans
Often used for: medium to larger projects by people with a reasonable credit record. Repayments are fixed over a set term, and your home and car are not used as security.
Remortgaging or borrowing more from your lender
Often used for: large projects such as extensions, by homeowners with enough equity. Rates are often lower than unsecured borrowing, but repaying over the remaining mortgage term can make the total interest much higher. The debt is secured on your home, and leaving an existing deal early may mean early repayment charges, so it is wise to speak to a mortgage adviser first.
Logbook Loans
Often used by: people who own their vehicle outright, need funds quickly and may not qualify for other credit. With V5 Solutions you can borrow from £1,000 to £50,000 over 18 to 60 months, and bad credit is considered because we look at vehicle value and affordability. Most customers receive the money within 24 working hours, and you continue driving throughout. Our frequently asked questions cover the details.
Watch for: the cost. Logbook loans are a high-cost form of credit, and they use your vehicle as security through a Bill of Sale. Check the representative example on our logbook loans page and compare it with the other options here.
Making the Final Decision
Compare each option on the total you will repay, the length of the commitment and what is at risk if your circumstances change. Our article on borrowing costs compared explains how to read APR and the total amount repayable.
Whichever route you choose, avoid handing large sums to a builder before work starts. Agree staged payments linked to finished stages of the job, put the agreement in writing and keep copies of every invoice. Paying part of the cost by credit card may also bring the extra protection described above.
Before committing, also check GOV.UK and your local council for any grants that could cover part of the work, such as help with adaptations for disabled people. This article is general information, not financial advice. If you are already juggling debts, get free, impartial help from StepChange or Citizens Advice before taking on more borrowing.
Your car may be repossessed if you do not keep up repayments on a loan secured against it.
