If you’re a homeowner, at some point or another you’ll probably be faced with the reality that your home doesn’t meet your needs. When that happens, you can either sell it and buy another home that better fits your lifestyle, or you can renovate the home you have. Renovations can be costly, which is why many homeowners look to take out a home improvement loan. Before you do that, there are a few things you should know.
A home renovation loan is designed to give you access to the funds needed to renovation or add to a private home. The loan is designed so that it can only be used to fund projects that will benefit the home. In other words, everything you do to the home with the funds must have the ultimate goal of keeping the home in good repair or to increase its market value. Use the funds for things like updating the kitchen or bathroom, updating the plumbing or electrical systems, adding a room, creating a walk-in closet, etc.
Generally, home improvement loans are short-term loans. The interest rate will depend on several factors, just as it does on with other types of loans. When you meet with the loan representative, be sure to have as many details about your proposed project ready. This includes the nature of the project, the projected cost, and some price quotations from potential contractors. If you can, it’s also a good idea to include an estimate of the projected increase in your home’s value as a result of the renovations. A lender wants to know that you have done your homework. If you are unable to get a direct personal loan due to your credit history, an alternative is going for a guarantor loan that could be used for your home improvement from companies like Buddy Loans.
There are several types of loans available to help finance a home renovation loan, each with its own advantages and disadvantages. IF you are looking for a lower interest rate, you may be able to take out a secured loan using your property as collateral, but bear in mind that if you default on the loan you are risking your home. These are best suited for major renovation jobs when you need a larger influx of cash. For smaller repairs, a personal, unsecured loan is often a better choice. It’s best to obtain quotes from a variety of lenders to give yourself the largest range of options possible. Sometimes, a line of credit is a better option over a traditional loan, particularly for larger projects, as it will allow you to pay for expenses as they arise.
If you are looking to renovate your home, you’re probably going to need some extra funds. A home improvement loan can be just the influx of cash you need. However, it’s important to go into the process of securing such a loan having done your homework and with realistic expectations. If you don’t have good credit, a secured loan may be your best option, as the risk to the lender is mitigated by the fact that you have secured the loan with some form of collateral. If you have a solid credit history and the means to repay the loan, however, you will have more options, likely including a lower interest rate, because you will not be seen as a high-risk borrower.
Improving your home is almost always a good investment. The resale value goes up, and you’ll make your investment back when it comes time to sell your home in the future. A home renovation loan, then, is a good investment in your future.
