What’s a home improvement loan? A guide to renovation lending

You’ve been scrolling through Pinterest for months, you’ve got a folder full of screenshots, and you can practically taste the first espresso you’ll make on your fancy new chrome coffee machine. But between the dream and the reality, there’s often a big question mark – how do you actually pay for it all?

When it comes to financing a renovation, understanding your options is the key that unlocks the whole project. You might use savings, borrow more on your mortgage, spread costs with a credit card – or take out a home improvement loan. This guide will walk you through how home improvement loans work, and how they could help turn your big plans into reality.

And if you’re just getting started on your homeownership journey, don't forget to check out our guide on setting up your household bills.

So, what exactly counts as a home improvement?

Basically, any project that spruces up your space. Whether you’re finally saying goodbye to that avocado bathroom suite, making more room for your growing family, or just creating a garden you actually want to spend time in.

Projects like:

• A brand new kitchen (and all the appliances that come with it)

• A loft conversion 

• An extension for a bigger kitchen or living area 

• A garden makeover 

• New windows, a new roof or a new boiler (the less glamorous but very important stuff)

Let’s look at how it works.

Step 1: planning and budgeting for your project

A successful, low-stress renovation starts with a solid budget. The final cost is often more than just the builder's quote, so it's important to factor in things like materials, skip hire and any new furnishings. It's also a smart move to get at least three detailed quotes from different tradespeople before committing.

Most importantly, renovations rarely go exactly to plan, so it’s wise to set aside about 10-15% of your total budget as a contingency fund for any surprises that might pop up. You can read more budgeting tips here.

Step 2: understanding home improvement loans

When people say "home improvement loan," they're usually talking about a personal loan you use for renovation projects. Here’s how it works:

• You borrow a specific amount

• You repay it in fixed monthly amounts over a set time period

• The interest rate is usually fixed, so you always know what you'll be paying

A home improvement loan is a type of unsecured loan, which means it isn’t tied to your home (like your mortgage is). 

Speaking of, did you know you can see your mortgage in the Monzo app?

Step 3: how to apply for a loan

Ready to take the next step? Here’s the home improvement loan application process in a nutshell:

1. Work out how much you want to borrow: refer back to the budget you created in step 1. Being clear on the amount helps you borrow only what you need.

2. Check your eligibility: before you apply, it's a good idea to check your credit score. Lenders will look at your score and affordability to decide if they can lend to you. With Monzo, you can check if you're eligible for a loan without leaving a mark on your credit file.

3. Apply: you'll typically need to give information like your income, address history and employment details.

A few things to think about before you apply

Taking out a loan is a big decision, so here are a couple of things to consider:

• Can you afford the repayments? Before you do anything, it’s a good idea to look at your budget. How much can you comfortably afford to pay back each month without stretching yourself too thin?

• Have you got any savings you can use? If you’ve got some money saved up, using it towards the project could mean you need to borrow less and pay less in interest overall. It’s always wise to keep an emergency fund separately though.

Step 4: using your loan wisely

Once your renovation is underway, staying on budget is the next challenge. That’s where we can help. With Monzo, you can see all your project spending in one place, get instant notifications, and set up Pots to keep your money organised. 

Your dream home is within reach

Renovating your home is exciting. And while the financing might seem daunting, understanding your options is the first step towards making your vision a reality. With a clear plan, a solid budget, and the right tools to manage your money, you can turn those Pinterest boards into your brand new living space. 

See if you're eligible for a Monzo home improvement loan right in the app, with no impact on your credit score. You can apply to borrow from £200 to £35,000. The interest rate we can offer you is based on your personal circumstances, and we’ll always show you the total cost upfront. 

Monzo Current Account required • UK residents aged 18+ • Eligibility criteria and Ts&Cs apply • Missed payments may negatively impact credit scores. Our representative APR for loans of more than £10,000 and up to £35,000 is 12.4% APR. For loans up to £10,000 it's 25.4% APR.

Questions? Answers.

What credit score do I need for a home improvement loan?

There’s no magic number. Lenders look at your whole credit report, your income, and your history with them to make a decision.

How long does it take to get a home improvement loan with Monzo?

If you’re eligible, you can apply in the app and get the money in minutes. 

Can I pay off a home improvement loan early?

With Monzo, you can pay it off early with no fees. But always check with your lender if there are any early repayment charges. 

Where can I find a home renovation loan calculator?

Most lenders have a loan calculator on their website. It’s a great way to get an idea of what your monthly repayments might look like for different loan amounts and terms. Try our personal loan calculator.