Kitchen finance – ways to pay for your renovation

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  • Do you need a bigger cooking space, a user-friendly island to get together, or maybe just more storage space and better organized storage? There are many reasons for wanting a new kitchen and whatever they are, the costs can quickly add up. But, there are a number of ways to get funding for kitchens that you may not have considered.

    A home improvement loan can be an effective way to pay for any major upfront need, including a kitchen. As long as you understand what you’re signing up for and are confident that you can stay on top of refunds.

    Kitchen finance – ways to pay for your renovation

    John Webb, a credit expert at the credit reference agency Experiential, says, “Failure to meet any of the repayment deadlines could adversely affect your credit score. Always make sure that you can afford the refunds and that all the terms and conditions are clear. ‘

    In addition to applying for a loan from your bank or mortgage lender, many retailers also offer financing options. In fact, when evaluating which kitchen and from where, it is worth noting the company’s credit offers and factoring them into your decision. Some ways to pay make more financial sense than others, depending on your situation.

    Image credit: Future PLC

    Kitchen financing – the options

    A similar kitchen idea from two different retailers could end up costing one much more than the other – despite the real price – if you don’t choose financing wisely. Here are the different ways to pay for your kitchen renovation.

    1. Personal loans

    The cost of a kitchen is not just the cost of cabinets, countertops and appliances; there is also the flooring, decoration and installation. With a personal loan, you can usually finance your entire project.

    Lenders like to see a good credit rating when they assess a person’s eligibility for a personal loan – if you have a good rating, you may qualify for a lower interest rate.

    “Many lenders, including Nationwide, offer ‘soft search’. So borrowers can see if they will be accepted and what interest rate they will be charged, ”explains James Broome, At national scale. “It allows people to shop without damaging their credit score. It’s also worth checking your credit report first to make sure it’s correct.

    “Improve your credit score by getting on the electoral roll, reducing debt and keeping credit card balances below 30% of the credit limit,” adds Experian’s John Webb.

    • The maximum amount you can borrow is usually £ 25,000, although some lenders may offer up to £ 50,000, if you meet their eligibility criteria.
    • Most personal kitchen loans are “unsecured”. This means that the lender cannot make a claim against your property or other asset if you fail to meet the repayments.
    • Loan terms are typically one to five years, usually with fixed monthly payments. The advantage of fixed payments is that you know what is owed on your account each month. This will also allow you to determine the total amount you will reimburse.
    • Longer terms of up to 10 years are available from some lenders. This could reduce the monthly payments, but you will pay more interest over time.
    Gray kitchen with island and bar stool

    Image credit: Future PLC

    2. Secured loans

    These are “secured” loans on your property, sometimes referred to as a homeowner’s loan or supplemental advance. Again, you will be able to borrow funds for your entire project plan (assuming you meet the lender’s criteria). Then, spread the repayments over a longer term than a personal loan.

    Since the lender has some security on their money, the costs may be lower. More importantly, if you default on repayments, the lender can sue the debt by asking you to sell your property, or by taking possession of it.

    “Before you apply for credit, take a look at the monthly repayment amount and make sure you can afford it along with your other expenses now and in the future,” advises James Broome, Nationwide.

    Do your calculations carefully. It might make more financial sense to get an installation and decorating loan. And then use the kitchen retailer’s finance option, if it’s uninteresting. Be aware that you will have two monthly payments, so calculate if that amounts to less than a larger loan.

    • It is possible to borrow more with a secured loan than with a personal loan.
    • You can extend the payments over a longer term – the same as your mortgage in some cases – making monthly payments more affordable.
    • Check what you’ll pay back by the end of the term to get a clear idea of ​​the total amount. The monthly payments might seem low, but the total amount you pay back might be higher than some other options.
    • Your home is at risk if you can’t make the repayments.

    3. Interest-free credit

    For most people, this is the best credit option. You only repay what you borrow – with no additional interest charges – in installments over a fixed number of years. Homebase offers five years of interest-free credit, while Ikea offers up to 48 months. Even The Used Kitchen Exchange, where you can buy high-end used and showroom models, offers a one-year interest-free credit.

    small kitchen island

    Image credit: Future PLC / David Giles

    “We offer an interest-free loan of £ 99 to £ 15,000, with repayments in installments between three months and four years,” says Donna Moore, Product Manager, IKEA. “It’s available on small items like tableware for large home projects. You can even include delivery, collection and installation. ‘

    Most brands have a simple online calculator. They allow you to see what your financing will be for the kitchens, the monthly payments will be on the amount you borrow. As with any loan, you will need to meet the eligibility criteria and be sure you can make the repayments.

    • Repay what you borrow and no more, as long as you respect your monthly payments
    • As with any loan, check what the penalties are if you miss a payment or need to extend the loan.
    • This type of credit is typically used for goods you buy from the retailer. So figure out if you need to borrow money for installation and decorating, including items, such as kitchen tile or flooring ideas.

    4. Buy now, pay later

    This can be an attractive finance option for kitchens if you have a savings plan and intend to repay the lump sum during the “vacation period”.

    Typically, it can be up to a year after purchase, so you have more time to pay. However, if you aren’t able to fully pay off the balance before the interest arises, buying a new kitchen can be an expensive way. We have spotted interest rates as high as 16.9%.

    “It’s important to clear the balance before the end of any interest-free period, or to have a plan to avoid paying high interest rates and other fees,” says John Webb of Experian.

    • Usually you pay a deposit (but not always) and then nothing for 12 months (depending on the retailer’s offer).
    • After 6 to 12 months, you usually have the option to pay off the balance (sometimes for a small fee). Or, opt for the financing option and spread it over three to five years.
    • It is important to consider the overall amount you will be repaying, as well as the interest rate and repayments before signing up. Over time, interest can reach over half the cost of cooking – on top of the original price!
    • The “Representative APR” you see advertised is an average interest rate, not necessarily the one you will be charged. The interest rate you pay will depend on your credit score.
    A small white kitchen with wooden beamed ceilings and pendant lights

    Image credit: Future PLC / David Parmiter

    5. Financing of kitchens by the retailer

    It may seem like a simple solution; buy a kitchen and pay for it monthly over five years (or less). However, it is worth looking for the lowest interest rates on retailer finance plans.

    The upside is that retailers like B&Q and Homebase include flooring, tiles, paint, and lighting. The cost of most of what you need for your project is spread over fixed monthly payments over one to five years.

    Others, like Harvey Jones, offer a similar arrangement. You pay a deposit and spread the cost of the goods (cabinets, appliances, flooring, etc.) over five years but not the installation. You will need to find other ways to finance the workforce. However, the downside is that it can be an expensive way to pay.

    • It can be an expensive way to pay for your new kitchen.
    • Only consider if the retailer does not offer interest free credit and the interest rate is lower than that of a personal loan.
    • The “Representative APR” you see advertised is an average interest rate, not necessarily the one you will be charged. The interest rate you pay will depend on your credit score.
    • Check the total amount you will be repaying, as well as the interest rate and your monthly payments.

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