Recent research conducted by Sainsbury’s Bank has confirmed that borrowers are taking out larger unsecured loans to pay for home improvements, compared to five years ago.
The total number of unsecured loans taken out from Sainsbury’s Bank to finance home improvements has remained steady, but the average loan value in 2014 was £9,352 compared to a 2018 average of £12,374. One of the reasons for the increase in the average loan value could be due to a reduction in rates for higher value unsecured loans. www.moneyfacts.co.uk data showed that in just five years, the average interest rate charged on a £15,000 loan has dropped by 2.0%, from 6.4% APR in June 2014 to 4.4% APR today.
www.moneyfacts.co.uk finance expert Rachel Springall said: “Loan rates have plummeted over recent years, so much so that if borrowers applied for a loan of £15,000 back in 2009 with a fixed repayment term of five years, the average rate was 9.1% APR in June 2009, while in 2014 the average rate for the equivalent loan and term stood at 6.4% APR. Today, the average rate has dropped to 4.4 and rates as low as 2.9% APR are currently available. One of the many reasons to take out an unsecure loan is for home improvements, and this can be a cheaper and quicker process to receive funds than borrowing more on a mortgage.”
The summer months are the most likely time that homeowners think about home and garden improvements, and an unsecured loan is one way of helping towards this cost. While unsecured loans can be a good way of funding DIY projects, it is essential that homeowners are confident they can repay the loan. Moreover, borrowers should also note that the rates on offer are dependent on your credit rating and you may not necessarily be offered the advertised APR.
However home improvements can be a great way of adding value to the price of property and make a worthwhile investment. However it is always important to ensure that the loan is affordable and can still be repaid even if your circumstances change.