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  1. HSBC UK 
  2. Loans 
  3. What is a home improvement loan?

What is a home improvement loan?

A ‘home improvement loan’ is essentially an unsecured personal loan that you take out to help fund home improvements, such as an extension or a new kitchen.

Here, we look at some things to consider when you take out a personal loan for home improvements.

What is classed as home improvements?

Home improvements include projects that upgrade your home's interior or exterior, such as:

  • A kitchen makeover or new bathroom
  • A loft conversion
  • An extension
  • A new roof
  • New furniture or flooring
  • Landscape work or a new driveway

How do personal loans for home improvements work?

You to borrow a fixed amount of money, which you pay back in monthly instalments, including interest, over a set period.

When you apply for a loan online, over the phone, or in a branch – you’ll be asked what you’re planning to use the money for. ‘Home improvements’ is one of the options.

At HSBC, you can borrow from £1,000 to £25,000 or up to £50,000 if you’re an HSBC Premier account holder. Repayments can be spread over:

  • 1 to 5 years for loans of £15,000 or less
  • 1 to 8 years for loans over £15,000

Your monthly repayments will be fixed, which means the rate of interest you pay will stay the same throughout the loan. This can make it easier to budget.

Keep in mind – the longer your loan term, the more interest you’ll pay overall. Our loans are also subject to status, and eligibility criteria apply.

Loan calculator

Calculate how much your loan repayments could be.

The difference between a personal loan and a home loan

Unlike an unsecured personal loan, a home loan is a type of secured loan. You can borrow money against the equity in your home and use it for home improvements.

Your property acts as ‘security’ for the lender, which means they can repossess and sell the property if you can’t meet the loan repayments. For this reason, interest rates are typically lower for secured loans, and you could potentially borrow more. 

You can take a home loan in addition to your existing mortgage (if you have one). Or it can be your only form of secured borrowing.

Remember – if you have a mortgage and take out a home loan, your monthly payments may increase. If property prices fall, you could also owe more than your home is worth (known as negative equity).

Explore: Borrowing more against your property

Things to consider before taking out a personal loan for home improvements

How much will the home improvements cost?

From modest home improvements to extensive building work, the cost will vary depending on what you want to do. Compare quotes from reputable traders and suppliers to get the best value for money.

Consider how much you’ll need from start to finish. The price of materials can also change, as well as the time it takes – so you may need a contingency fund if the cost goes up during the project.

Can you afford the loan repayments?

With any form of borrowing, you need to be able to pay it back, including any interest. 

Creating a budget will give you an idea of how much you can afford to pay each month. Look at your income for the last three months and compare it to your spending over the same time. 

If you find the cost of the loan is more than you can comfortably pay, you may want to rethink your plans. Perhaps you could renovate in stages or wait until you can save more.

Do you have savings available?

If you can, use savings to help fund your home improvements. That way, you can reduce the amount you have to borrow and how much interest you’ll pay.     

It’s important to keep enough savings to cover unexpected costs, though.

Will the home improvements add value?

Some improvements will increase your home’s potential and add value to your property, but not all will. For example, a loft conversion could add value by giving you extra living space, whereas some DIY projects may not.

You should plan carefully and try to fund home improvements in the most affordable way. You want to make sure any expensive work done adds lasting value.

Think carefully before securing other debts against your home.

Your property may be repossessed if you don’t keep up repayments on your mortgage.

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