How to Choose the Best Home Improvement Loans
What is a Home Improvement Loan?
Simply put, a home improvement loan is a personal loan of any kind that is being used to fund a home improvement project. There are several types of home improvement loans available; you just need to find the one that is best for you.
What Are My Home Improvement Loan Options?
It is always a good idea to do some research before making a big financial commitment, so take some time to learn about your home improvement loan options. Check out some common home improvement loans below.
Home Equity Line of Credit (HELOC)
A HELOC is a loan that uses your home as collateral and allows you to borrow up to the total amount of equity you currently have in your home. This is a popular option because you have a designated window of time to use it as a line of credit, adding to the total as needed. During that same time period, you can opt to pay only the accrued interest each month. The downsides are that the interest rate may change and even go up, and using your home as collateral can be risky if you are unable to make the payments.
Personal Home Improvement Loan
A personal home improvement loan is a personal loan that can be used for anything, including home projects. Personal loans are great for people with good credit or who are preparing to sell or rent out their home. They are also a good option for financing smaller, less expensive home projects. Some of the benefits of a personal loan for home improvement are listed below.
- You will have the same payment every month, making it easier to budget for.
- You can get approved more quickly than with a HELOC.
- You don’t have to have collateral or a lot of equity in your home.
- They have shorter terms for repayment.
How to Find the Right Home Improvement Loan
Every financial decision should start with the same step: budgeting. Take a thorough look at your current spending and income to determine the amount you could comfortably afford to pay each month. Then write out a detailed list of expenses associated with the project and add 10-15% for unexpected costs. If the total amount needed to complete the project is more than you can afford to borrow, look again and see if there are ways you can cut costs. Once you have reached a number you can confidently stick with, take that to the lender and don’t go any higher.
Check out competing lenders before committing to one and make sure you are getting the best rates and terms available to you. You’ll also want to think long-term and choose the financing option that will benefit you most over time. For example, a HELOC might be a good idea if you are fixing up your home to sell it in the near future and you know you will pay off the loan with the sale of the home. Whereas, a personal loan in this instance would follow you to the next house, unless you are able to pay it off in the same way.
How Do Home Improvement Loans Work?
When applying for home improvement loans, you will need to submit your credit score, your debt-to-income ratio, the amount of money you are requesting, and your basic personal information like social security number and employment history. You do not necessarily need to have good credit to obtain a loan; however, a better score does increase the likelihood of approval and can affect the interest rate.
Nowadays, you can do most everything online, including submitting a request for a home improvement loan. It is smart to shop around and compare rates before choosing the lender you want to stick with. You can save time doing research by going with a company like PersonalLoans.com. We use your information to connect you with one of our lending partners who has an offer that can work for you. Once you have been connected and approved, the lender can complete the loan process quickly and get you the funding you need for your home improvement project.
Get Started on Your Next Home Improvement Project
If you’re ready for your next home improvement project and just need the funds to get started, check out PersonalLoans.com. Learn more about us and what we do, then let us help you find a lender for your home improvement loans!