Financing Your Home Remodeling Project with a Personal Loan

There are many reasons why you may want to remodel your home. Perhaps you are looking to sell, or maybe you feel you want that spark of inspiration back, or maybe there are some serious problems with the home, and it is about time you sorted it out before it gets any worse. In many cases, home remodeling means you need home financing, but luckily there are many ways you can secure this. To help you decide on how best to proceed, we have come up with this guide:

Should you Secure Home Financing?

This really depends on how much you need the upgrade, your financial situation, and the size of your home renovation projects. If saving is not a feasible option, then a loan is a perfectly reasonable way to go. As long as you are able to easily make the monthly repayments on the size project you want, the process does not last too long, and that the project will definitely increase the value of your home, it is a sound investment.

Home remodel or home repair loan

These are unsecured personal loans which banks, credit unions, and some online lenders will offer you. Unsecured means you are not offering up any kind of collateral, like your house; however, the interests rates will be higher as a result. Your credit score will affect the interest rate and if you can qualify for this type of loan. If all is well, then the money is quickly paid into your account, sometimes in just one day. The timeline for repayment is generally quite short, and the total sum you can borrow may also be lower than other loan types. You will most likely have fees to pay if you miss any payments. This is a good loan for someone with a poor credit history and a small home project to finance. 

Home equity line of credit (HELOC)

This is a secured loan, your house is collateral, but this means you have lower interest rates. It is rather flexible as you have the opportunity to take out what you need when you need it, up to the maximum of your borrowing limit. The interest rate is variable, reflecting market conditions, but your house could be foreclosed on if you do not make a payment. After you apply, it can take 2 to 4 weeks to receive your loan. You will need at least 15% to 20% equity in your home. This is a good choice for ongoing home projects which do not have a set budget. Anyone with a good credit score and home equity could benefit from this loan.

Home equity loan

This is sometimes called a second mortgage, with your home as collateral. You will receive a lump sum you pay off with a fixed monthly fee over a period of a few years. The interest rate is fixed, so market fluctuations are not an issue here. It is a great choice for people who know exactly what their project will cost. It usually takes between 2 and 6 weeks to receive the funds.

  • Short-Term Lending and Personal Loan FAQ Guide

    Borrowing money for the first time can be intimidating. There is a whole range of financial tools used by lenders to determine the borrower’s creditworthiness. For good reasons, however, personal loans and short-term lending are increasingly becoming popular for covering sporadic and massive expenditures.

    Here’s a guide that covers short-term lending and finding the best personal loan that suits you.

    What are business needs suitable for short-term financing?
    Different types of short-term lending are appropriate for varied business needs. Examples of needs projected to have short-term ROI include physical renovation, hiring new staff, and purchasing new equipment.
    Is APR an ideal way to make cost calculations?
    The annual percentage rate is only a single way to represent total interest cost and fees as a yearly payment which may appear higher than the overall cost of a short-term loan. When you look at other factors like the total cost of your loan and different business needs, you’ll realize that a short-term loan would better fit your business needs. At a glance, a short-term loan with a higher APR is more affordable than a long-term loan with a lower APR.
    How long does it take to receive a response?
    Depending on the loan issuer, your credit history and loan amount, the typical wait time could be 45 minutes or less. However, some lenders could take up to 3 working days to approve, it will vary from lender to lender and based on your unique lending needs.
    How does the lender determine the interest rate?
    Your personal short-term loan interest rate is determined based on your risk profile. The general rule is that the lower your credit score, the higher the risk. Lower risk means a lower interest rate, and higher risk means a correspondingly high interest rate.
    How long will I have to repay the loan?
    You’ll have to begin repaying the loan within 30 days in installments. Most lenders provide repayment terms ranging from six months to six or more years. The interest rate and monthly payment will be impacted by the period you choose to repay the loan.
    Are there other fees associated with personal loans?
    Creditors may charge sign-up, processing coupled with landing fees. In most cases, these charges are billed only once and are often outlined in the application documents. Although it’s not uncommon to have obscured payments, hidden fees would generally add up between 1 to 5% of the entire amount.
    Do I need a good credit score?
    Before you start applying for a short-term personal loan, it’s crucial to know you’ll qualify with your credit score. Most loan issuers are looking for customers with good credit scores. However, if you have a good relationship with the creditor, you may get a favorable term, particularly if your account shows a history of timely payments and honoring the terms of past loans.
    Can I get a loan with a low credit score?
    Loan issuers have different loans designated for people with varying credit scores. Lending options meant for consumers with bad credit are, without a doubt, different from those with good scores. While a higher score boosts your approval chances and gives you favorable terms, there are specific loans meant for people with low credit scores.
    How do I apply for a short-term personal loan?
    Once you’ve identified the financing option ideal for you, assemble all the documentation needed. Do not yield to the pressure to have money as soon as possible to offset the chances of making a shoddy application. It’s always good to fill the documents comprehensively, attach personal information, your resume if needed, business and personal tax returns, financial statements, and the collateral value that may be required.
    Will the lender approve my application?
    Your business and personal credit will be essential metrics in determining a lender’s decision. At its core, one of the handiest tools used by the lender is looking at your credit score. At the same time, other factors include your debt ratio, business debt, revenue trends, personal and business debt coverage.

    How do I improve my chances of getting approved?
    It sounds harsh that most loan requests are rejected. Looking at the reasons that contribute to applications’ inevitable rejection, the ideal way to improve your standing is to build your credit score. Aside from convincing the lender that you’re better suited for approval, a healthy credit score helps you qualify for favorable interest rates.

    Personal Loan Markets

    Innovative Finance helps connect consumers who are searching for help with consolidating debt, home improvement projects, credit card consolidation and more with online personal loan lenders. If you are searching for an online, unsecured loan product and live in these markets, we have lenders who may be able to assist you.
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