Another reason for choosing a home improvement loan is to simply add an extension or modernise your home for your own quality of life. Many homes do not have double-glazing or central heating, and these systems are expensive to install. Getting a home improvement loan will allow you to pay for these essential jobs, and pay back loan at an affordable rate.

A home improvement loan is in some ways an extension of your mortgage, in that first port of call for someone wanting to carry out major home improvement work on their home would be their mortgage lender. It is, however, a separate loan, which can be paid back over a different period.

The mortgage lender will not discourage this home loan, as it is in their interests for improvement work to be carried out on home they are lending on, considering that they effectively own it until mortgage is repaid. Also, it's a chance for them to make a little bit more money out of interest on loan.

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If borrower defaults on an unsecured loan lender cannot repossess goods, but has to resort to other legal remedies to recover capital, interest and costs.

You should usually borrow as little as possible, and draw up a budget plan to determine how much you need. An unsecured loan might not offer a particularly high amount, so if you're a homeowner and need to borrow more, you could look into secured loans.

Unsecured loans are invariably more expensive than secured loans because lenders have no guarantee that you can repay loan, and therefore charge you more in interest to cover cost of insurance policies that they need to take out to protect them should you default on repayments.

In event that a borrower does not pay up, lender will invoke terms of legally-binding credit agreement and pursue borrower through legal system.

Lenders are obliged by law to tell you how much they charge for this type of finance and this is worked out as an annual percentage rate (APR). Ask whether APR figure quoted is 'typical' or is what every applicant is charged.

Check whether there is an early repayment penalty.

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