Credit Vs Loans for Home Renovations

Like everything else, home renovations require funding. For most people, the two main options open for securing this funding are borrowing the cost of the work upfront, through loans, or paying for services on credit as you go.  In general, the main advantage of taking the loans option is the predictability of the repayments.  Part of the reason for this is the structured nature of all personal loans type products.

At a more immediate level, several of the big high street banks now feature online tools that provide a quick illustration of projected repayment levels given the loan amount – for an example, take a look at the Calculator for use when investigating loans from Santander.

A common feature of all of the personal loans available from the high street banks is that repayments are fixed. Although the interest rate that you are offered may be different from the representative rate advertised for the loan - due to your personal circumstances - once you are offered the terms of your specific deal, you will know what rate you will be paying for the duration.

The cost of using credit cards, on the other hand, can vary wildly depending on how you use them. Those with a good credit rating, who are able to take a pick of the best credit card deals on the market, can find that it is possible to make significant purchases at zero percent interest, and then transfer the balance onto another period of interest free repayments on a different card, before the deal ends on the first card. If managed well, this process can go on for years, but it does require solid financial control and planning, and the ability to maintain a good credit rating so that the balance transfer process can be maintained. Of course, there is always the risk that lending conditions will change at some point in the future, and the zero percent balance transfer deals will simply be withdrawn.

This can make credit card juggling a risky business, particularly for those with a merely reasonable, but not outstandingly good credit history. The main risk is that you end up with a significant balance left on a credit card when a low interest, or interest free deal ends, and find yourself unable to secure another balance transfer options.  As you will no doubt be aware, full standard interest rates on credit cards often exceed 30%.

Across the market, the interest charged for the average personal loans is currently under 10%, and so this is always going to beat the thirty plus whack of the average credit card on standard interest repayment.  If you want more information, impartial advice on loans and credit cards is available at www.moneyadviceservice.org.uk.