Are you looking to score a home improvement loan for your next big project?
If you’ve ever found yourself asking “how do home improvement loans work?” then you need to be educated before taking out a loan so you know exactly what to expect. Check out this beginner’s guide to home improvement loans to learn more.
What Are Home Improvement Loans?
You knew you get loans to purchase a home or car or even go to college, but did you know that you can get a loan to do home improvements? Home improvement loans enable you to make upgrades to your home by borrowing the money from a lender to pay back.
There are two options when it comes to home improvement loans:
- secured home improvement loan
- unsecured home improvement loan
A secured loan comes from financial institutions like banks. The bank will “secure” assets from the borrower to ensure that repayment is made. If the borrower can not pay back their loan, the bank will then get those assets.
An unsecured home improvement loan doesn’t take interest in the borrower’s assets. Instead, they look at the borrower’s employment and credit to determine whether they will provide a loan.
Knowing the difference between the two types of loans will help you choose the best home improvement loans for your particular situation.
Are you able to combine cash with your loan? A great way to lower the interest that you pay is to use cash in addition to your home improvement loan. You may even find that you don’t need as large a loan as you expected based on how much you have saved.
When it comes to asking for a home improvement loan, it will benefit you to be as specific as possible. What renovations will you do? New kitchen? Porch and deck addition? The lender will appreciate the specifics and whether the improvements will add value to your home.
You should also ask for a specific amount of money. Have the estimates ready so you know exactly how much you need. Don’t ask for more. Lenders want to know that you have done your homework.
Know Your Credit Score
You should always know what your credit score is, but it’s especially important to know when you are looking for a loan. Can you get home improvement loans with bad credit? The short answer is yes. However, in order for the highest likelihood of a loan approval, and furthermore a desirable interest rate, fair or better credit is best.
If you are nervous because you have a poor credit score, don’t give up on your dream home just yet. You should still see what kind of financing you can get depending on your current financial situation. You can prequalify without affecting your credit right here on FinanceMyProject.com
Ready to Start Your Project?
If you’re ready to begin your home improvement project and plan to get a loan, you will need to check your rates. You can check your home improvement loan rates without affecting your credit score, by using our loan tools.
Let us help you get personalized offers from multiple lenders in under two minutes.