Home Improvement Loan
Do you need to repair or renovate your home? Home Improvement Loans could be the perfect fit for you, because it will not make you feel forced to use your savings or emergency funds to take care of your property.
What is a Home Improvement Loan?
It is a loan taken out by a homeowner with the purpose of using the funds to fix up their properties, usually their homes. They are not an specific type of loans but they represent a way borrowers can use a loan - usually a personal loan - to maintain, repair or improve their homes. Depending on the lender you pick for the loan and on the type of loan you decide, some will require proof that the money is going towards home improvements - by being used by the homeowner in the house or paid to a contractor.
Typically, these loans tend to be an unsecured personal, which means that is a regular loan paid monthly, with interests and your home - or any of your properties - is not used as collateral. As a consequence, you could potentially use any unsecured personal loan to fund work on your home.
Options for Home Improvement Loans
There are many options for financing your home improvements. We already mentioned personal loans, but lenders also offer other options that nay be good for you, depending on the specific improvement project you are trying to do and the amount of money you will need:
> Home Equity Line Of Credit (HELOC): This loan lets you borrow money for your improvements against the value of your property. With this option, you get a line of credit equivalent to your home worth. This amount is usually up to 80% of your home’s value, minus the amount of your home loan.
> Home Equity Loan: Putting your home equity can also offer you to get a lump sum of money, according to the value of your home. What’s more, you will get a regular loan with monthly payments, due dates and interests - which are usually higher.
> Mortgage Refinance: This option allows you to refinance your current mortgage in order to lower your rates and monthly payments, which can allow you to use the saved cash that you free up towards home improvements.
> Credit Card: If the amount that you are trying to borrow is not large and you do not want to pay it back for a long time, you can use a credit card to make the purchases or pay the services you need for your home renewal. Additionally, you can get a credit card that gives you rewards, cash back or even 0% interest rate for an introductory period - which you can use for the work you need to do and save up interests.
> Government Programs: There are some options offered by The Federal Housing Administration, based on eligibility criteria, such as the Title I.
> Save & Pay: If you are able to wait, we also recommend borrowers to be patient and save up in order to avoid paying fees and interests. Using cash will also help you stay within your budget and not spend more than you expected.
How to choose the best Home Improvement Loan?
The best Home Improvement Loan us not the same for everyone and it will depend on the homeowner’s needs and budget. This is why it is important that, before applying for a loan, future borrowers analyze some important aspects in order to make the right decision and pick the best fit for their situation:
✅Loan Amount: You have to make sure you know the exact amount you need. Making a budget and getting quotes is the best way to at least know the approximate amount you will have to request for. Try to avoid getting a larger loan than the one you need because you will end up paying more interests and rates.
✅Rates: Considering and evaluating the APR that the loans offer is important to pick the one that will help you save up the most while giving you less extra fees to spend on.
✅Eligibility Requirements and credit score: Before applying for the financing, make sure you meet all the requirements instead of wasting your time and money. Some lenders charge application fees so you do not want to apply for those, unless you can afford it and you are sure that is the best option for you. Also, it is necessary to check your credit score and evaluate if it is enough for the loan you are trying to get.
✅Experience and Satisfaction with customers: In this digital era, it is easier to get feedback from customers of the lender you are interested to work with. Always make sure that your lender is reliable, safe and has good customer reviews. You can also do this by asking your friends and family about their experiences with the lender if it was the case.
Steps to apply for a Home Improvement Loan
Once you have in mind the loan(s) that fit you and your needs, it is time to get ready to and apply. You can do it in 5 easy-to-follow steps:
1. Define amount
Keeping in mind your budget is important to define the exact amount you are trying to borrow, but always ask slightly above the amount you will request.
2. Define loan term
Your budget is also important to pick the term of your loan because it will determine how quickly or slowly you can pay off the loan.
3. Get Prequalified
Getting prequalified is important to check the rates of your financing options and have a better vision of the conditions of the loan.
4. Confirm Eligibility
Take into consideration some actors that are important for approval. The qualifications required will depend on your lender:
If everything else is ready, it is time to apply and get funded to get closer to your dream house.
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