The Fixer: Home improvement loans

The Fixer logo%VIRTUAL-SkimlinksPromo%Have you been left out of pocket due to poor service or sharp practice? Do you have a money problem that won't go away?

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Dear Fixer,
My wife and I want to build an extension on to our 3-bedroom home in Leeds.

The work will increase the size of the kitchen and give us a fourth bedroom, which will give us the extra space we need and should add a sizeable amount to the value of the property.

However, while we have some money saved up, we need to borrow about £25,000 to get the work done. What is the cheapest way to borrow this sort of sum?

D Harper, Leeds

Dear Mr Harper,
There are a number of ways to borrow £25,000 - even though most of the top personal loan deals are only available on up to £15,000.

Secured loans, for example, offer a way to borrow larger amounts for less by using your home as equity.

There are risks involved in borrowing via secured loans, though. You could even lose your home if you fall behind with the repayments, so it is vital to ensure that you do not overstretch yourself.

Another option is to remortgage to free up some of the equity you have in your home at the moment. This could well prove a cheaper option.

Mortgage rates for those with a large deposit – or in other words a lot of equity – currently start at less than 2%, with HSBC and Skipton building society among the market leaders.

However, the downsides include potentially high upfront fees and the fact that remortgaging means paying interest for longer on the whole amount owed.

As with secured loans, you also risk losing your home if you are unable to keep up with the repayments.

My advice would therefore be to look at the remortgage deals available to you and compare them with the best secured loan rates you can find - remembering to look at the overall cost (including fees) of each option, not just the interest rate, and to keep an eye out for penalty charges.

The Fixer

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