Let’s face it, home renovations can be expensive. And chances are unless you’ve undergone some serious planning, you’ll need a loan to help you in funding your projects. Especially if those projects are fixing unforeseen problems and issues that have arisen. But no need to fret, there are home renovation loans available that can help you fund your plans and take some stress out of the equation.
What Kind of Loan Is Best?
There are many types of loans. Each has its own set of terms, conditions, and interest rates. When it comes to home improvement loans, there are several options of money lending that can be explored. Options for financing these projects can range from loans, to credit card lending, to home refinancing options. Ultimately, whichever loan you choose is dependent on your personal financial situation, credit, home equity, and goals for repayment.
- Personal Loans
Personal loans are dependent on just that, personal financial attributes. Personal loans are given based on your credit score, income, and other financial metrics and don’t focus much on your home itself. Most people choose personal loans if they have relatively low home equity or don’t want to use their home as collateral. Because this loan is based on your credit score, if you don’t repay it on time or at all, it will impact your credit negatively. Additionally, personal loans are administered rather quickly, so if you’re in need of funding relatively urgently, this is an advantage. If this sounds like you, perhaps personal loans are your best option.
- Home Equity Loans
Unlike personal loans, home equity loans are dependent on your home and home equity. Generally, you can up to 85% of your home’s value minus your outstanding mortgage balance. There are plenty of online calculators that can help you get a rough estimate of what you would receive. Within a home equity loan, you receive a lump sum of money at one time. Home equity loans are advantageous if you’ve already planned out the expenses of your renovation projects and know almost exactly how much you will be spending. Over a series of years, you pay back the loan at a fixed rate.
- Government Loans
Government loans come from the Department of Housing and Urban Development. Within this department, there is a loan called Title I. Title I loans are used for property improvements and are repaid in regular monthly installments. Because these loans are government-issued, they do have some strict parameters. While these loans vary from state to state, most require the home you work on to be your main home and you are unable to sell your home for a certain time period after.
Tips For Managing Your Loans
Taking out a loan can feel overwhelming. But with some precise planning and good loan management, you can feel in control of your financial situation.
- Create A Calendar
One of the hardest parts about taking out loans is making sure you pay your monthly installments on time and consistently. Creating a calendar with specific dates for payment can help you see how your payments will spread out over the course of the years. Making your loan repayment a scheduled element in your personal finances prioritizes it and highlights its importance.
- Do Your Research
While this step is primarily a pre-loan strategy, doing your research throughout your loan period is important for staying knowledgeable and aware of your situation. If you find that the lender you are currently using is getting to be unmanageably high, you can always switch to a different lender. Ultimately you want to be with a lender that you can afford to pay consistently. Don’t be afraid to do your research and switch lenders.
- Use Online Resources
Online resources are incredibly helpful in the home loan process. In fact, if you’re reading this you are utilizing one right now. Aside from informational blog posts like this one, there are many different loan schedule templates, equated monthly installment (EMI) calculators, and other informational videos and blogs.
The Bottom Line
Home renovations are oftentimes inevitable. Whether it’s because you’re interested in selling your home and you need to upgrade some elements, or you have run into some unforeseen problems that require fixing, home improvement is something that you need to budget for. Doing your research on the loan that is best for you can not only save you from a giant headache but can keep your financial situation stable even with these extra expenses.
About The Author: Joe has over two decades of experience in the construction and project management industry. From putting in man hours as a laborer to owning his own contracting company in North Carolina, he is passionate about helping others create safer, more efficient work sites and finding the utmost efficient project management processes.
Photo by rupixen.com on Unsplash
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