Homeowners pay an average of 1% of their home’s value in home maintenance annually and that doesn’t include home improvements.
Fixing up a home, whether a complete remodel or small cosmetic changes, can cost thousands of dollars. If you don’t have the money lying around you may look for the best home improvement loans.
Not sure what to look for? Check out this guide on everything you need to know about home repair loans.
You have options when you need a home improvement loan.
The most common are secured home improvement loans. You can secure a home equity loan or home equity line of credit using your home as collateral.
If you take out a home equity loan, you receive the loan funds in one lump sum and pay principal and interest each month. The loan has a fixed term, usually 5 – 20 years, and you have a fixed payment each month. The interest may be fixed or variable.
A home equity line of credit works more like a credit card. You get a line of credit that you can draw from as needed. It’s great for open-ended projects or large home remodelling projects that will be ongoing.
You’re obligated to pay interest on the funds you withdraw, but that’s it. You can pay back the principal, but it’s not required until the end of the draw period, which is usually after 10 years. After the draw period, you pay principal and interest for the next 20 years, and can’t draw from the line any longer.
An unsecured home improvement loan is another option. Because there’s no collateral, you may pay higher interest rates and/or fees to make up for the risk, but you don’t have to risk your home.
Home repair loans are great for obvious things, such as major unexpected repairs.
You have a hole in your roof, your plumbing leaks, or you need your electric rewired. If you don’t have the funds set aside, you may need a home improvement loan to fund it.
Besides sudden and unexpected repairs, remodelling loans are great for:
Before you take out a home improvement loan, understand the pros and cons.
If you are looking to get a personal loan for home-improvement purposes, many lenders offer a simple and fast pre-qualification process that does not impact your credit scores.
To see if you can pre-qualify for the lender's offer, you just need to answer a few questions that usually includes your annual income and your address. After answering a few questions, the personal loan lenders will give you rates for your home-improvement project.
Many personal loan lenders lending renovation or home-improvement loans do not have any pre-payment penalties. This information is usually available on the lender's website.
SimpleDirect has partnered with many top-rated lending partners in the US, and can give you instant options without impacting your credit score.
If you don’t qualify for a home improvement loan or don’t want one, you have a few options:
If you have or are eligible for a rewards credit card, you can earn some nice cash-back on your purchase. This works well if the repairs/improvements aren’t too expensive and you can pay the balance off fast.
You can refinance your first mortgage, tapping into your home’s equity. Today’s low interest rates make this an affordable option, but you need good credit to qualify.
If you have savings, you may tap into it, using the funds to invest back in your home. You should see a decent return on your investment, which may be worth more than the interest you’d earn in a savings account.
Check out the best home improvement loans available to you based on your credit and qualifying factors. If you can put up collateral, you’ll get the lowest rates and the best terms. If you can’t, there are still plenty of affordable options, allowing you to improve your home’s value and see a nice rate of return on your investment.