Home Improvement Loans

Home Improvement Loans

Credit history is one of the most important factors influencing approval, along with your income. However, some lenders now offer financing even for borrowers with bad credit.

Surely you understand that home renovation is quite expensive, since it will be necessary to cover a huge amount of expenses. However, now there are various financing options, so you don't have to pay for everything yourself. Below you can explore the best options to help you pay for all your home renovations. Compare options and choose the one that suits you best with Finance Guider.


Best Home Improvement Loans


Home Equity Line Of Credit (HELOC)

HELOC is a fairly good option for obtaining financing against the security of your own home without refinancing. Home Equity Line Of Credit is quite similar to a credit card in that you can borrow money many times up to a certain limit. It is also worth noting that Home Equity Line Of Credit interest rates are adjustable, which means they can rise and fall over the life of the loan. The advantage of this option is that the interest on the Loan is charged only on the amount that you borrowed, and not on the entire credit limit. Thus, you can often borrow only a fraction of the maximum amount of the line of credit. In this case, your payments will also be lower.

With Home Equity Line Of Credit, the maximum loan value will be determined by your income, the value of your home, and your credit score. Repayment terms most often range from 5 to 20 years. It is also important to note that the lender may be allowed to change the terms at the time the loan is repaid.

The advantages of HELOC are the ability to reuse the credit line and minimal closing cost, while the disadvantages are adjustable interest rates and the ability to change repayment terms.


Home Equity Loan (HEL)

This type of financing allows you to borrow money against your equity, i.e. your home. It will be calculated by appraising the value of your home and subtracting the outstanding mortgage debt. It is important to note that the Home Equity Loan does not pay off your Mortgage, which means you will continue to make regular payments as you did before, and on top of that, you will be making payments on the new Home Equity Loan.

The advantage of this loan is that it is similar to a mortgage, which means your home will be collateral, so lenders will offer relatively low interest rates. Also, the HEL interest rate will be fixed so you don't have to worry about paying more interest. You will always know how much you owe. Also quite often Home Equity Loans are tax-deductible. Another plus of this offer is that you can borrow up to 100% of your capital, and repayment terms are most often from 5 to 30 years.

The disadvantages include the fact that most banks and lenders will charge various fees such as origination fees and other closing costs. In addition, it is worth remembering that this loan does not pay off the Mortgage, so you have to make both mortgage payments and loan payments.


Personal Loan

If you are looking for an unsecured type of financing to pay for your home improvement, a Personal Loan may be just what you are looking for. Thus, your house will not be collateral for the loan. Therefore Personal Loan can be obtained much faster than HELOC or HEL. Sometimes you can even get a Loan within one business day.

However, you should be aware that since the loan is unsecured, it often has higher interest rates than the above options. Interest rates on a Personal Loan can be either adjustable or fixed. However, the better your credit history, the better loan offer you will receive. Repayment terms usually range from 2 to 5 years.

The benefits of a Personal Loan include a simple and convenient online application that eliminates the need to travel to the lender's store, fast financing within one or more business days, no collateral, and relatively low interest rates. The disadvantages are lower borrowing limits, short repayment periods, and high late fees. Depending on the lender you choose, you may also face prepayment penalties.


Cash-out refinancing

Another good option that you can also pay attention to is Cash-out refinance. So you get a new mortgage that has a larger balance than the one you currently have. This way you can pay off your mortgage and save the money you have left.

It is also important to note that the money you receive from cash-out refinance comes from your own capital. There are no specific rules on how you can dispose of the money received, so you can easily spend it on home improvements or renovations. This option is a good option for those who want to repay their loan at a lower interest rate. However, you should also keep in mind that cash-out finance has higher closing costs that apply to the entire loan amount.

The advantage of this offer is that you can use the money received for any needs, you will continue to make only one mortgage payment and you can reduce the interest rate and loan term. The disadvantages may include high costs of the transaction closure and fees. It is also important to remember that the new loan will have a larger balance than the current mortgage loan.


Home improvement loans No equity 

If you're looking to make improvements to your home but don't have any equity to use as collateral, there are still loan options available to you. Home improvement loans with no equity are possible to obtain through government-sponsored programs or by working with a private lender. Keep in mind that these types of loans will likely have a higher interest rate than traditional home equity loans.


FHA 203(k) rehab loan

The FHA program is geared towards those who are buying a home or refinancing for the first time. You need to find a FHA-approved lender, and it applies to older homes and fixer-uppers. But it makes the borrowing process much easier as it consolidates your mortgage and rehab funds into one loan. The FHA requirements are not as strict -- down payment is lower (3.5%), and you can get approved even with a 620 FICO credit score.


Home improvement Loans basic requirements 

If you are in need of a few thousand dollars for repairs, we told you that there are personal loans for this. However, if you have no money at all and the repair needs to be done immediately, you may need more money. You can take an installment loan for up to $35,000. All you need is:

  • Being of age
  • Having an active Bank account
  • Having a stable job and income
  • Being a US resident