What Can I Do With a Home Improvement Loan?
Do you need a new kitchen? How about a pool? Well, if you own your home these things are not as far out of reach as you might think. Many homeowners are acquiring secured loans with the equity in their home to finance home renovations, debt consolidation, or purchase of that new car or boat that they have been dreaming of.
A Loan To Improve Your Home
Home equity loans can be used for improvements to your home. However, one thing that lenders usually require is you must have sufficient equity: this is the difference in what your home is worth and what is still owe on it.
The money you have paid on your home can work for you. With enough equity you can remodel and update your home; be it installing wood floors or carpet, adding an extra room, remodeling your outdated kitchen or adding a fireplace to your family room. Not only do you get the improvement you want but it adds value to your home in turn making it worth more. Home Improvement loans can be a great way to increase the value of your home, and therefore increase the equity you have in it.
A lot of companies that specialize in home improvement offer their own financing. However, you need to check this out thoroughly before agreeing to go down this route. These companies often do not offer the best interest rates: shopping around to see what various home improvement loan deals are available on the market could save you a fortune over the term of the loan.
Applying for a personal loan or using your credit card for improvements will also cost you more than a secured home improvement loan. Bad or impaired credit can affect your chance of being approved for a personal loan but with home ownership it is not quite as difficult as acquiring an unsecured personal loan. Another bonus for secured loans is the interest rate. Often the interest rate on a secured loan is more competitive and can actually be much lower than most other loan types. They are often more flexible and can be extended to allow you more time to repay them. That is a major plus for people on a budget or in the event that something arises that makes it difficult to make a payment when it is due.
Home Improvement Loan Drawbacks
The major drawback with any secured loan arises if you have some problem which makes it impossible for you to keep up your repayments. In this case you could end up losing your home. Having said this, their are often a number of different programs and insurances that can take out, to ensure that you can meet your repayments for a period of time should you become unable to work: this is of course an extreme scenario.
All in all a secured improvement loan can be a good way to finance your home improvement plans as long as you are comfortable with the repayments you will have to make and fully understand the terms and conditions of the loan agreement.