Poor credit does not mean you have to give up on fixing your home. Many homeowners put off needed repairs because they believe no lender will say yes.
You can apply for a home improvement loan for low credit scores from a direct lender. These lenders focus on what you can afford right now, not what happened years ago. Decisions come fast, and money can land in your account within 24 hours.
Your house does not have to stay broken just because your credit score is low. There are options available, and most of them are far easier to get.
Ways to Finance Home Improvements with a Low Credit Score
Specialist Bad Credit Home Improvement Loans
These loans exist for no other reason than to lend to people that high street banks will turn away. You can apply for online loans from direct lenders for home improvement. These lenders do not work off the strict scoring models. They will look at your current income and outgoings first. They will see what happened on your credit file three years ago. You will get a full final offer before you have to commit to anything.
The rates are between 15% and 49% APR, compared to the 3% to 12% that someone with perfect credit will be offered. This is the premium you pay for a lender that will actually say yes. The typical loan amounts run from £1000 up to £25000.
The providers have no early repayment penalties, so if you come into extra money. You can clear the whole loan at any time with no extra charges. Most will give you a full decision the same day, or within 24 hours at most. They will accept CCJs, defaults and even IVAs as long as they are over 12 months old.
Additional things:
- Most will not leave a hard mark on your credit file for an initial quote
- You can use the money for absolutely any work on your house, no restrictions
- You do not need to provide builder quotes to get an initial decision
- Providers allow you to choose your repayment date to match your payday
Secured Loans Against Your Property
You use the equity you have built up in your home as security, which removes almost all of the risk for the lender. They will approve any applicant, regardless of credit history.
The interest rates are 8% to 15% APR, which is less than half the rate of most other bad credit unsecured loans. You can choose to borrow from £10000 to over £100000, and you can pay back the money between 5 and 25 years. This is the only way most people with bad credit can borrow larger sums for major work like a new roof or extension.
If you miss payments, you can lose your home. You have to be a homeowner, and you need to have enough unused equity in your property to qualify.
Additional things:
- You can usually borrow up to 80% of the unencumbered equity in your home
- Most providers will ignore all credit issues over 24 months old
- Fixed rates are available for the full term of the loan
- You can make overpayments of up to 10% per year with no penalty
Guarantor Loans for Renovations
This is an option if you have someone you trust who is willing to back your application. A friend or family member agrees that they will make the payments if you cannot. They will need a good credit score, usually 650 or above.
The rates are between 30% and 50% APR, and you can borrow between £1000 and £15000. Both you and your guarantor must understand that you are both equally responsible for the full amount. If you stop paying, the lender will chase both of you. There is no other collateral required. This is one of the only options available to people with very recent defaults or CCJs.
Additional things:
- Your guarantor does not need to be a homeowner for most providers
- You can build your own credit score while you make repayments
- No hard credit check is run on you for the initial quote
- Most providers will allow you to remove the guarantor after 12 months of on-time payments
Government Grants and Schemes
This is the first option you should check before you apply for any loan. The Disabled Facilities Grant will get you up to £30000 for disabled home adaptations. The ECO4 scheme will pay for full insulation and boilers for low-income households.
The Green Homes Grant will contribute towards energy efficiency works. The Warm Homes Discount will help pay for your heating system.
Additional things:
- You can apply for multiple grants at the same time
- Many councils will arrange and pay the builder directly for you
- Applications usually take between 4 and 12 weeks to process
- There is no upper age limit for any of these schemes
| Government Grants | ||
| Grant Scheme | Max Amount | Eligibility |
| Green Homes Grant | £5,000-£10,000 | Income-based |
| Disabled Facilities | £30,000 | Disability needs |
| ECO4 Scheme | Varies | Benefits recipients |
| Local Authority | £10,000-£15,000 | Means-tested |
| Warm Homes Discount | £150 annually | Pension Credit |
Using Existing Credit Cards Strategically
For very small jobs under £3000, this can actually be the cheapest option available to you, even with bad credit. If you can get accepted for a 0% purchase card, you can pay for all the work and pay no interest for the length of the promotional period.
Money transfer cards will let you move cash directly to your bank account, which is useful if your builder will not take card payments. If you already have existing debt, you can use a balance transfer card to clear that first and free up more space.
If you do not clear the full balance before the promotional period ends, the interest rate will jump very high. You will also usually get a much lower credit limit than someone with perfect credit.
Additional things:
- A completed 0% period will improve your credit score
- You can make multiple small purchases over the course of the work
- Most will not charge any extra fees if you clear the full balance early
- You will not need to make any new application if you already have the card
Conclusion
Don’t sit and wait for problems to work themselves out. You now know all your options. You can decide which one is affordable and the right thing for your home. And start your journey. Your home should be your life, and your home should work for you.
Jessica Rodz is the Senior Content Writer at Cashfacts. She has a long career in the field of content writing and editing. Jessica has the expertise in the UK lending marketplace where she has worked with 7 different lending organisations and acquired many responsibilities from preparing loan deals and writing blogs for their websites.
At Cashfacts, Jessica is managing a team of experienced loan experts and doing a major contribution in guiding the loan seekers via well-researched blogs. She has done graduation in Business (Finance) and now currently doing research papers on the UK financial sector.
