First Time Buyer
Taking out a loan to pay for a home conversion
If you are thinking
about converting your loft or building an extension
to add space to your home, you essentially have
three options when it comes to getting the money
together. In an ideal world, you would have
enough money put aside to pay for it up front.
This would mean that you could begin construction
right away, and you would have nothing more
to pay. The next best option would be to save
up the money for it in a high interest savings
account, but if you need the conversion in a
hurry, for example if you have a baby on the
way, then you probably wouldn’t be able
to get the money together in time. The only
option available to you if you are in a hurry
and do not have all the cash to hand is to take
out a loan.
There are three
main types of loan – secured loans, credit
cards, and unsecured loans. A secured loan is
one in which you put up one of your assets,
typically your home, as collateral, so that
if you cannot afford to make the repayments,
the lender will be within their rights to repossess
your home in order to make up the shortfall.
Usually, you can get much lower rates of interest
with this type of loan, and you will be able
to borrow larger sums of money much more easily,
but many people are reluctant to risk losing
the ownership of their home for obvious reasons.
Unsecured loans,
also known as personal loans, do not require
any assets to be put up as security on the loan.
Usually, you will not be able to borrow as much
money as you would with a secured loan, and
the interest payments tend to be higher. The
deal that you are offered will largely depend
on your income and credit record, so if you
are on a low income, or have a bad credit history,
you may find it hard to get a personal loan.
However, you can usually borrow a lot more with
an unsecured loan than you can with a credit
card.
Credit
cards are the most easily available form of
credit, and can work out a lot cheaper than
a personal loan for smaller sums of money. Some
cards will offer a zero percent introductory
rate, so if you anticipate being able to pay
it back quickly, you might not have to pay any
interest at all.
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