There are several moments in a person’s life when they experience a change which results in some form of house renovation. It might be a large change like welcoming a new-born into the world meaning you need to redecorate the spare room, or a small change like putting some pictures up on the wall.
From painting the bathroom door, to building an extension to create an extra bedroom, house renovations allow us to be creative, say goodbye to the old or simply make a space more practical. However, these kinds of changes can often come with a hefty price tag, and it’s not always possible to save enough in advance to pay for them in full. This often leads people to apply for credit to cover the costs of house renovations, so they don’t find themselves unable to meet their existing financial commitments in the meantime.
As long as you have a good awareness of your finances, you can generally use credit for any reason, although some types of credit are more suitable for certain purposes than others. For example, you probably wouldn’t use a payday loan to redecorate your kitchen because payday loans have a high interest rate and should only really be used in emergency situations: decorating the kitchen is often not an emergency situation.
Polar Credit offers a credit line which is a relatively new type of credit, and as such there can be some confusion over what a credit line should be used for. In this article, we will discuss:
A credit line is a revolving short term line of credit which you can withdraw from, up to your credit limit, to meet your cashflow needs. The money is transferred directly into your bank account, instead of being accessed via a separate payment card, and a minimum payment is collected at the end of your statement period. You pay interest on the credit you’ve withdrawn, not the full credit limit, and typically there are also transaction fees.
Polar Credit has a commitment to provide a sustainable credit product, which means we don’t only offer a useful and flexible type of credit, but we are actively working to make borrowing more accessible and less expensive – even for those with a poor credit history. We reduce our customers’ rate of interest over their borrowing period with us and we use open banking to assess applications to get a real-time view of your financial circumstances when you apply.
The term ‘house renovation’ covers a wide variety of improvements and repairs around the home, so the appropriateness of a credit line depends on what you are planning to do. Our maximum credit limit is £2000. This is typically enough to cover redecoration costs in most rooms, although you’d be hard pushed to fit a brand new kitchen within that budget.
The pros are mainly:
Because you can make minimum payments towards a credit line, if your project spans a few months, you don’t need to worry about repaying the balance in full straightaway. Of course, only making the minimum payment will mean it takes longer to repay the credit line, but often this kind of flexible repayment arrangement can provide a financial security blanket when your cashflow is inconsistent.
At Polar Credit, we understand that your credit history might not accurately reflect your current financial circumstances, and that a bad credit score doesn’t necessarily mean you’ll be unable to repay your borrowing. While we can’t guarantee acceptance, a Polar Credit line is more accessible than most mainstream credit products.
Renovations are sometimes accomplished within a few weeks, but they can spread out over several months, or you might just get the bug and want to do the entire house. A credit line is a running account which means you can borrow and repay to match your cashflow – as long as you stick within the terms of your credit agreement. This means a credit line can be a financial helping hand throughout months of redecorating and renovating, without having to submit a new application each time or budget exactly at the start of the works.
For most internal renovations, our maximum credit limit of £2000 is sufficient. You could buy more than enough paint to redecorate the entire house, and probably a few bits of new furniture too if necessary. Plus, once you’ve repaid some of your credit line, the funds are available again to withdraw as your future circumstances require.
The cons of using a credit line to renovate your house include:
Credit lines don’t bring the same legal consumer protections that credit cards do. Section 75 of the Consumer Credit Act 1974 means that your credit card provider is equally liable if something goes wrong with a purchase you have made on your credit card, as long as it cost over £100. This may be why a lot of people choose to put housing renovation expenses on a credit card. For example, if you order some materials and they never arrive, you can make a claim with your credit card provider to recover the costs. Not everything is covered and there are some exceptions. It’s often why people suggest putting a holiday deposit on a credit card – if the holiday is cancelled, you should get a full refund (not just the deposit).
This may sound fairly obvious, but it’s almost always cheaper to use your savings to pay for things, instead of taking out credit. Credit lines charge interest, so if it’s possible, try and save as much in advance as you can. Of course, if your house renovation is more of an emergency repair, then you might not have time to put money away before it needs fixing.
You won’t be able to withdraw more than your credit limit, so if your renovations go over-budget and you find yourself with a cashflow shortfall, your credit line might not be able to cover the difference. With Polar Credit, you may be entitled to a credit limit increase, so it’s always worth asking if you do need extra funds, but it’s not something you can rely on. Plan as much as you can and try to keep a reserve in case things do go wrong – even if that means the renovations take longer than you’d hoped.
If you’re thinking of doing some big work to your house, then a credit line might not be the best option because the credit limit on most credit lines is seldom enough to carry out extensive renovations. If you’re thinking of doing an extension, ripping out a few walls or replacing your kitchen, you’ll likely need a much bigger budget. It’s quite common for people to re-mortgage their house if they need to make some big changes. It means you don’t need to worry about an additional loan repayment and it usually only adds a few years to the loan term. If you’re doing the works to sell and downsize, it might even be advisable as you’ll recoup most of the costs from the equity in your house when you sell it. Otherwise, bank loans are quite common and credit cards are another popular way to pay for home improvements. If you rent your property and you need to make some repairs, your landlord might be liable for the costs, so check your contract and with them directly prior to making any purchases or applying for any credit.
Before taking out credit or ripping old wallpaper off the walls, make a plan and a clear budget so you’re prepared for the financial commitments of redecorating. If you do need credit, only apply for as much as you need to cover the works (possibly with a little wiggle room), so you don’t end up paying interest on credit you never used. Try to save a small reserve fund in case something goes wrong and get quotes for the works in advance, so you’re not surprised by unaccounted for costs. Renovating your house is exciting, but it should never become an unnecessary financial burden.
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