Do you wish to renovate or repair your home with a personal loan? Home improvement loans are the best personal loans for the purpose of home repairs or renovation. You can get up to $100,000 depending on the number of renovations required.
It is important to state that home improvement loans are not the only options available for homeowners who want to repair their kitchen or replace their roof. There are other options such as home equity loans and credit cards. However, in a case where you don’t have much equity on your home and you’re not willing to incur credit card debt, a home improvement loan is a perfect alternative.
Like other unsecured personal loans, a home improvement loan is not backed by your home. In fact, the rate given by the lender fundamentally relies on your creditworthiness. Also, the interest rate and fees are most likely not flexible, which makes it easier for borrowers to schedule payments in their budgets.
Features of Home Improvement Loans
There are key features that need to be taken into consideration when applying for home improvement loans.
Higher rates
Due to the high risks on the lender’s part, the interest rates of home improvement loans are higher than a home equity loan or home equity line of credit.
While interest rates attached to home equity loans and HELOCs are often single digits, rates from home loans lie in between 6% and 36%.
Swift funding
Home improvement loans have a quick nature. Online applications are processed within minutes and the loan money is accessible within 24 to 48 hours in some cases.
No tax benefits
Home improvement loan beneficiaries are not eligible to request for tax reduction on the interest. On the other hand, mortgage loan beneficiaries may be eligible for a tax deduction.
Home Improvement Loan Uses
With a few restrictions, you can spend your loan funds for any home repair such as kitchen redesign or roof repair.
You can use the fund for a bathroom remodel, to get the latest deck, or to install a swimming pool in your house.
Home Improvement Loan Alternatives
Apart from traditional banks and popular online lenders, there are online creditors who specialize in helping applicants with bad credit scores and history.
However, if you do not qualify or you cannot afford the offered rates, there are other options to consider.
Credit unions
Poor credit should not be the reason you’ll get exploited by online lenders. You can apply for a personal loan to your credit union, as they consider people with bad or average credit scores.
At most, the rate given by federal credit unions is 18%.
Federal programs
There are government programs in place for people who want to fund their home renovation.
For instance, there are two programs under the federal housing administration, namely Energy Efficient Mortgages and Title I loans.
Credit cards
A credit card loan for home renovation is an option that’s only available for people with excellent credit scores (usually from 720 upwards) and medium-sized home renovation plans.
Banks can offer eligible applicants a 0% interest credit card that would cater for the expenses. Moreover, applicants who qualify won’t have to bother about the interest charges for a specified period, usually ranging from 12 to 18 months.
Home equity loans and HELOCs
Homeowners who possess equity in their homes might prefer low-interest secured loans. Home equity loans and HELOCs are less expensive when compared to personal loans. They often come with up to 20 years of the loan life.
The only disadvantage of these two options is that your dream home might no longer be yours if you refuse to repay your lender.
Summary
Home improvement loans are the type of unsecured loan used to finish a renovation project without your home as collateral. The loan amount, monthly payments, and loan terms are strictly dependent on the credit history and type of loan.
More often than not, lenders take compensation from borrowers to go through their loan applications. This compensation is termed an origination fee.
