Home improvement loan - joint vs single application and other questions.

ChasingtheWelshdream

Good morning all. We've never applied for a loan before so am looking for a little guidance please, particularly with the best way to apply for finance. 

Background:
We are homeowners (no mortgage) and would like to borrow approx. £10-20k to fund home improvements. The exact amount is vague at the moment as we are in the planning stage. The house is a long-term, liveable renovation and we have a needs/wants wish list. Ideally we would borrow enough to cover everything, but this depends on how much we are accepted for. The higher amount includes some non-essentials which could be delayed. (Eg an en-suite. One bathroom is fine at the moment, but an extra would make life much easier as the kids become teenagers, and make the house more appealing if we ever do sell. It's a large, bedroom-heavy house.) 

Because we are in the fortunate position of being mortgage-free, we both work part-time in fairly modest  jobs (a lifestyle choice to cover childcare). DH also makes a few £K per year through a self-employed side hustle.  Our total earned income is the equivalent of a modest full-time job. We also receive child benefit and a small amount of tax credits.

Questions:
Single vs joint finances: Our individual salaries are obviously much lower than our total household income. Can we apply as a couple and include all our income, presumably with a better chance of acceptance?

Side hustle: DH is a sole trader and has many years tax returns proving his income (between £6-8k p/a). Would this be included/accepted or only his salary?

income: Do we include Child Benefit as household income? Children are all primary age so 'guaranteed' for a few years. I wouldn't include tax credits as these fluctuate each year and may well stop soon.

Eligibility checkers: These give an 80% chance of the full amount being borrowed and the corresponding monthly payments. But they only appear to cover single applicants. Could we then apply as joint applicants following the links from MSE, or would we be better approaching our bank who holds our joint accounts?

Credit history: We both have a good credit score (irrelevant, I know), but DH doesn't have any current credit, and hasn't since we paid off the mortgage 3 years ago. Hence, no recent credit history. I have 4 credit cards in my name, one for regular cashback, and three with modest 0% balances (covering a couple of large purchases). My affordability is less as a result, but I do have credit history. Again, would this impact whether we apply as joint/individual applicants?

Application process: Once we take the plunge and apply, do we request the exact amount, or can we apply with an 'up-to' figure? Eg, can we apply for £20k and see what we are offered, or do we apply for £20k but then get rejected and have to re-apply with a lower amount?


And finally, is a loan the best way to finance large amounts like this? The other option is to explore a very small mortgage, but (a), we are reluctant to secure the loan on the house and (b), I think the minimum is £25k anyway. Current house equity is approx. £180K. 


If you are still reading, then thank you very much! As I say, we are in the planning stage and looking to see how feasible it is to fund the improvements  in a managed way, rather than simply putting on credit cards.

ChasingtheWelshdream

Edit: We have joint accounts with 3 banks in, but none appear as options on the MSE loan calculators. I've just logged on to our bank accounts, and one shows a 'very likely' for the full amount of borrowing with a decent APR, based on the info they have about us. The other two don't have eligibility checkers. If we were to apply to one, say Santander, and be rejected or offered a higher APR, that would impact our applying through another bank?

Apologies if this is a very obvious question!

[Deleted User]

I think before anything else you need to get a clear idea of exactly how much you need to borrow, no good borrowing 15k now then find you need another 5k.

ChasingtheWelshdream

venison said:

I think before anything else you need to get a clear idea of exactly how much you need to borrow, no good borrowing 15k now then find you need another 5k.

Agreed, and we do have detailed costings of each individual project, including contingencies and the preferred order of work. But we also need to find out how many of them we can afford to do in this initial phase - needs vs wants - hence the large range of loan requirement. Which comes back to ascertaining how much we would be able to borrow, without making numerous applications. The only experience we have with borrowing is our old mortgage, in which we were told we could borrow 'up to' on the AIP,  and credit cards where the credit limit is decided on acceptance. This is new territory to us and feeling a little overwhelmed. 

On the figures I have, we can easily afford repayments on the full £20k, but I guess I'm worried that we may get declined on that, and then declined further by trying for the lower amount, with the credit file showing repeated applications. 

Nebulous2

No-one can really say what your chances are of acceptance. I've  a few comments and  suggestions though. 

On an application it will ask for income. Beside that is likely to be a box / link which says how they define income. That will tell you what counts. Be sure to be consistent however, as different amounts could land you under suspicion of fraud. 

Best rates tend to be from £7500 to £15000. Have you considered two applications, one each at £7.5k?

What timescale are you looking at? Loans for more than 5 years begin to get more expensive. 

If you don't get enough,  some credit cards offer 0% deals for existing customers. Barclaycard and MBNA both do, do you get offers from them? You could use that to top up the loan. 

Your husband should consider a credit card in his own name, to help build his history. 

ChasingtheWelshdream

Thank you Nebulous, and apologies for the delay in replying. You're right, it will come down to applying and seeing. Yes, I regularly get offers for 0% spending/money transfer from Barclaycard. In fact I'm wondering what to do with one now, which is a separate thread.

Our main bank has an option to apply as a couple, but we need a branch appointment. I think we might go along and have a chat to see what they recommend.

And yes, it would be a good idea for DH to build up some credit history of his own.

Although, we will be modifying our plans a little as we will now be adopting a rescue dog imminently. Some of the more 'pretty' wants will have to be placed on hold for a while until we know how destructive he will be!