The house can get worn down over down and need repair over time. Sometimes, there is an urgent storm heading and you are being urged to do some home improvement so that your house can stay intact after the storm. Home improvement projects can cost some money and require a good financial strategy and budget. If you don’t have enough savings, you can always try to get a home improvement loan.
Usually, you need a good credit to geta home improvement loan. However, you can also find lenders that will offer loans to homeowners with fair credit. So, the first thing is to check your credit score. If you have a credit score above 660, there should be no problem in getting a loan. You can request a credit report for review. If you notice an error, you can inform the credit bureau and they can rectify it so that your credit score will improve.
Next, you need to prepare some documents that are required for the home improvement loans. They will require you to prepare proof of employment, and proof of income documents. Some lenders will want to see a document from the contractor that give an overview of the expenses that are incurred for the home improvement project.
Some homeowners opt to obtain a home equity loan which allows you to borrow against your home. With home equity loan, you can get a lump sum and repay it with fixed monthly payments. The interest rate is fixed for the rest of the loan term. For example, your home is valued at $500,00 and you still owe the bank $400,000 in the mortgage, so you can only borrow 100,000 in a home equity loan.
Home equity line of credit (HELOC) does not provide you with a lump sum but a maximum amount that you can borrow. You can withdraw any amount from the account up to the maximum amount. HELOC allows you to pay interest on the amount that you actually use. Both home equity and HELOC loans are secured loans which uses your home as collateral. This means that the bank can repossess your house if you fail to pay back on time.
A safer way to raise funds for your home improvement project is to get a personal loan. Personal loan is an unsecured loan so you don’t have to use your house as collateral. There is no need to meet the requirement for having a specific amount of equity in your home. This type of loan is best suited for small home improvement project that require up to $30,000 in expenses. Personal loan has higher interest rate but it has less stricter requirement that allow you to get approved even with a fair credit. It also have a shorter loan term that allows you to pay off your loan faster.