Do you need a larger cooking area, a cozy island to gather together or maybe just more storage space and better organized storage? There are many reasons for wanting a new kitchen and the costs can add up quickly. However, there are a number of ways to get funding for kitchens that you may not have thought of.

A home improvement loan can be an effective way to cover large upfront expenses, including a kitchen. As long as you understand what you are signing up for and are sure that you have a handle on the repayments.

Kitchen financing – payment options for your renovation

John Webb, Credit Expert at Experian Credit Bureau, says, “Failure to meet one of the repayment deadlines can create an undesirable dent in your credit score. Always make sure that you can afford the repayments and that you are aware of all the terms and conditions. ‘

In addition to a loan from your bank or building society, many dealers also offer financing options. In fact, when weighing which kitchen comes from where, it is worth considering the company’s loan offers and including them in the decision. Depending on your circumstances, some payment methods make more financial sense than others.

Kitchen financing – the possibilities

A similar kitchen idea from two different dealers can, despite the actual price, be significantly more expensive with one than with the other if the financing is not chosen carefully. Below you will find the various payment options for your kitchen remodeling.

1. Personal loans

The cost of a kitchen isn’t just the cabinets, countertops, and appliances; There is also flooring, decoration and installation. You can usually finance your entire project with a personal loan.

Lenders like to see good credit when assessing a person’s eligibility for a personal loan – if you get a good score, you may be eligible for a lower interest rate.

‘Many lenders, including Nationwide, offer soft search. This allows borrowers to see if they are accepted and what rate they are being charged, ”said James Broome, Nationwide. ‘This allows people to browse around without compromising their creditworthiness. It’s also worth checking your credit record first to make sure it’s correct. ‘

“Improve your credit score by signing up on the electoral roll, reducing debt, and keeping credit card balances below 30% of your credit limit,” added John Webb of Experian.

• The maximum amount you can borrow is generally £ 25,000, although some lenders may offer up to £ 50,000 if you meet their eligibility criteria.
• Most kitchen personal loan finance is “unsecured”. This means that if you fail to meet repayments, the lender will not be able to claim your property or any other asset.
• The loan terms are usually one to five years, usually with fixed monthly installments. The advantage of fixed payments is that you know what is due from your account every month. This also allows you to calculate what the total amount you will be paying back will be.
• 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 the term.

Photo credit: Future PLC

2. Secured Loans

These are loans that are “secured” against your property and are sometimes called a home equity loan or advance payment. Again, you can borrow funds for your entire project plan (assuming you meet the lender’s criteria). Then spread the repayments over a longer term than with a personal loan.

Since the lender has some security for their money, the costs can be lower. What is crucial, however, is that if you default on repayments, the lender can enforce the debt by asking you to sell or take possession of your property.

“Before you apply for a loan, see what your monthly repayments will be and make sure you can afford it with your other expenses now and in the future,” advises James Broome, Nationwide.

Carefully calculate your sums. It may make more financial sense to take out a loan for the installation and decoration. And then use the financing option at the kitchen retailer if it is interest-free. Be aware that you have two monthly repayments so calculate if this will be lower than a larger loan.

• A secured loan allows you to take out more loans than a personal loan.
• You can stretch the payments over a longer period of time – like your mortgage in some cases – which makes monthly payments more affordable.
• Check what you will repay at the end of the term so that you can see the total amount. The monthly payments may seem low, but the total amount you pay back can be higher than some other options.
• Your home is at risk if you cannot make the repayments.

3. Interest-free loan

For most of the people, this is the best loan option. You only pay back what you borrowed – with no additional interest – through payments spread over a set 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-quality ex-display and second-hand models, offer an interest-free annual loan.

Photo credit: Future PLC / David Giles

“We offer interest-free loans between £ 99 and £ 15,000 with maturities from three months to four years,” says Donna Moore, IKEA Product Manager. “It’s available for anything from small items like dishes to large home projects. They can even include delivery, collection and installation. ‘

Most brands have a simple online calculator. They let you see what your kitchens finance is, monthly payments are made on the amount you borrow. As with any loan, you need to meet the eligibility criteria and be confident that you will be able to make the repayments.

• Pay back what you borrowed, and nothing more, provided you meet your monthly payments
• As with any borrowing, check to see what penalties you will face if you miss a payment or need to extend the loan.
• This type of credit is typically used on the goods that you purchase from the merchant. So, consider borrowing money for installation and decoration, including items like kitchen tile ideas or flooring.

4. Buy now, pay later

This can be worthwhile for kitchen financing if you have a savings plan and want to pay off the flat rate within the “vacation time”.

Usually this can be for up to a year after purchase, leaving you to pay longer. However, if you cannot pay the balance in full before the interest is due, buying a new kitchen can be costly. We found interest rates up to 16.9%.

“It’s important to balance your balance before the end of an interest-free period or to have a plan to avoid high interest and other fees,” said John Webb of Experian.

• Typically, you pay a deposit (though not always) and then pay nothing for up to 12 months (depending on the dealer’s deal).
• After 6-12 months, you usually have the option to pay the remaining balance (sometimes for a small fee). Or use the financing option and spread it over three to five years.
• It is important that you look at the total amount you will be repaying, as well as the interest rate and repayments, before signing up. Over time, the interest on the kitchen can be more than half – in addition to the original price!
• The “representative APR” you see advertised is an average interest rate, not necessarily what you will be charged. The interest rate you have to pay depends on your creditworthiness.

Photo credit: Future PLC / David Parmiter

5. Financing for kitchens from the dealer

This may seem like a simple solution; Buy a kitchen and then pay for it monthly for five years (or less). However, it is worth looking for the lowest possible interest rates on retailers’ financing plans.

The advantage is that retailers like B&Q and Homebase offer flooring, tiles, paint and lighting. Most of what you need for your project is costing itself in fixed monthly payments over a period of five years.

Others on the premium end, like Harvey Jones, offer a similar arrangement. You pay a deposit and spread the costs for the goods (cabinet, device, flooring, etc.) over five years, but not for the installation. You need to find other ways to fund the work. The downside, however, is that it can be an expensive payment method.

• This can be an expensive method of payment for your new kitchen.
• Only consider if the retailer doesn’t offer an interest-free loan and the interest rate is lower than a personal loan.
• The “representative APR” you see advertised is an average interest rate, not necessarily what you will be charged. The interest rate you have to pay depends on your creditworthiness.
• Review the total amount you will be repaying, as well as the interest rate and your monthly repayments.