Once you’ve settled into a new home, it doesn’t take long to start thinking about home improvements. A conservatory, an extra bedroom, stables – depending on where you are and how much space you have, the options are limitless.
But there isn’t always the ready cash to pay for renovation and extension. A personal loan is often the best way to go. Unsecured loans have a number of advantages over credit cards, especially if it’s a large amount you are looking to borrow. Interest rates are generally a lot lower, averaging around 10% with a loan from a bank compared to around 14.5% – and often much higher – on a credit card.
Not only that, but the minimum payment is generally higher, and therefore more realistic in terms of paying it back quicker – credit card minimum payments are often designed to keep people paying into the system for years on end. A personal loan is in some ways a bigger short-term commitment, but won’t be an albatross around your neck in ten years time.
The credit card is often more sensible if you plan to borrow a small amount of money. A thousand pound loan, for instance, might set you back as much as 22% per year in interest, because lenders generally offer discounts for bigger loans, whereas credit cards will be fixed, regardless of the amount borrowed. Santander offer some of the cheapest loans out there right now, with typical APRs of around 8.9% – click the link to get a quote on one of their personal loans with Santander.
Most loans have a ‘typical’ interest rate. Under UK banking law, the typical rate should be attainable to at least two thirds of a bank’s customer base. Many lenders avoid advertising this rate as a way of getting around the legislation. The APR offered to you will depend largely on the size of the loan and your credit history. If your record is good, you can expect a more favourable rate. If you have a history of defaulting on repayments you are likely to have to pay a higher rate – that’s if your loan application is accepted at all.