'Best way to finance any project is through saving'

CEO of Cambrian Savings and Loans,

Counting the cost of home improvements

If you are considering sprucing up the garden or a home makeover, you are not alone, May is the most popular month for home improvements. Ann Francis looks at how to keep a handle on costs.

With multiple bank holidays, and the weather finally looking good, May is a time when a lot of us start thinking about home improvements.

In fact, a poll of 2000 people by British Gas found that May is the most popular time for homeowners to carry out home improvements and essential maintenance works, with 45 per cent of us feeling the need to undertake DIY.

Maybe it’s the extra time off work, the benefit of longer days or just the sunshine that helps us to literally see our homes in a new light, either way, spring is traditionally a time to start sprucing up your home.

Whether it’s a redecorating, installing a new kitchen or improving your home’s energy efficiency, one thing is for sure about home improvement – costs can easily escalate. If you are working to a budget, set aside 10-20 per cent extra for the unforeseen.

The best way to finance any project is through saving. However, if the cost of the project is more than you have saved, then it pays to look carefully at the variety of financing options.

The two main types of loans are secured or unsecured. Secured typically means that the loan is tied to your home, for example a mortgage, and this is often (but not always) used to borrow larger sums of money of £10,000-plus.

Secured loans are a lower risk for lenders, as they are tied to your property, so they are normally cheaper than unsecured loans. However, great care is needed with secured loans as the loan provider can repossess your home if you do not keep up repayments.

The second option is unsecured finance, which can either be at the point of sale in the DIY Store, a personal loan from the Credit Union, bank or building society or even a credit card.

For small home improvements, a credit card giving zero per cent interest on balance transfers or new purchases is an option, although you must remember to repay the balance before the offer expires as the ‘standard’ rate is typically much higher than a personal loan.

Use an online loan calculator to find out the total amount that will be paid. It may be that you are financially better delaying the renovation and saving for a year to fund the project.

If you opt for a loan, it also pays to check the rate offered and whether there are any additional fees such as late charges or early repayment penalties. In addition, check whether the APR is ‘representative’, if this is the case it may only apply to 51 per cent of people who successfully get the loan.

If you are told ‘your rate will be higher due to your personal circumstances’ shop around as you may well find a better deal elsewhere.