If you’re like most people, then you probably feel excited and daunted at the same time about your upcoming home extension project. But the rewards – both financial and quality of life – are nearly always worth the time and effort that you need to put into a significant home improvement project. There’s definitely no need to feel ashamed about being slightly apprehensive about the project, as there’s a lot to think about. With that in mind, here are some ways to ensure your home extension is a bit easier for you, at least from a financial perspective.
Spend Time Reviewing your Finances
Let’s begin at the start. Reviewing your finances needs to be your first step before committing to a home improvement project of any size. Write down your income and expenses clearly and look at opportunities to realistically reduce your spending, or perhaps even how to earn a little extra cash.
Be honest with yourself: will the extension cause us financial issues? Do you have enough time right now to keep on top of the work at home? Will the quality of your life be affected by reducing your spending? Asking the right questions will enable you to make a rational, informed decision about whether or not to proceed with your home extension and will save you lots of stress and anxiety in the long run.
If you know that you’re good to go, then it’s time to create a structured financial plan for the project to ensure you’re able to make the required payments without delay or issue.
Utilise your Savings
Lots of us baulk at the idea of dipping into our savings for any reason, but a home extension might just be the best reason of all to utilise them. After all, using your savings pot means you don’t have to borrow money to finance the project, which will save you from paying extra fees and interest in the future, which will save you money.
But using your savings to complete a home extension project will certainly take a huge chunk of money from your savings account. If you decide to tap into your savings, then make sure you think carefully about your other financial commitments and ensure it’s not going to cause you issues in the near future.
Apply for (or use) a Credit Card
If your credit score is good, then you could always apply for a credit card to finance a home extension project. Lots of banks and even credit agencies offer impressive introductory offers, and some come with zero or extremely low-interest rates (at least at first).
But credit cards require a good level of self-discipline to make them work for you. When the introductory period is over, which is typically up to six months, the interest payments will start to increase significantly. So, to prevent the costs from mounting up, it’s really important to repay the money you borrow on a credit card as quickly as possible.
What’s more, you probably won’t be able to finance your entire home extension project using a credit card, as many builders and traders don’t accept credit cards due to the charges they have to pay to process them. However, you can still pay for a large proportion of the cost, and you’ll also receive protection from Section 75 of the Consumer Credit Act. This could prove to be crucial if you experience any issues during the completion of the project.
But don’t forget, your credit score will determine whether or not you can pay for your home extension via credit card, as well as the introductory offers you can access. Therefore, it’s a good idea to review your score and browse the offers available to you before you commit to starting your project.
Apply for a Personal, unsecured loan
Another option available to you when it comes to financing your home extension is personal loans. They’re an ideal option because they’re simple to understand, flexible, and approved much more quickly than other forms of credit. The money is typically deposited into your bank account in a lump sum, and you’re then required to repay the money in monthly installments.
It’s essentially a fixed investment plan that helps you enormously when it comes to budgeting your finances, as you can be clear about what needs to be paid back and when.
But you might find that an unsecured loan, a credit card, or even your savings might not be sufficient to cover the total cost of the extension project. If this is the case, you can look for a secured loan from a lender. They work similarly to unsecured loans but with one crucial distinction: the lender will take an asset – often your home – as security. This is worrying for some people, as if you fail to take the money back, they could legally take your house.
On the flip side, secured loans usually come with lower interest rates and higher credit limits due to the increased protection for the lender. While secured loans are suitable for some people, make sure you have a strong enough financial footing to repay a secured loan before you take it out, as it can put you under serious financial pressure if you’re not careful.
Ultimately, home improvement projects (and particularly extensions) are super exciting. They add value to your home and improve your quality of living. We hope that you choose to finance the project in a way that makes sense to you and your current financial situation.