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How Do Home Improvement Loans Work?

Most homeowners have a long list of improvements they’d like to do around the house. Some of these might be projects that absolutely have to be done, but there are plenty of purely aesthetic changes that will just make you enjoy your home more. Whatever the reason for your home improvements, this can be a lot of work to take on. Being able to handle home improvement projects yourself is something many of us lack the skill for, so you often have to hire a professional. No matter the size of the project or who’s doing it, this can be extremely successful. The cost of completing these projects can keep people from doing them, but it doesn’t have to be like this. 

Home improvement loans can help make your next renovation project possible. Here, you can learn more about how these loans work.

What is a Home Improvement Loan?

A home improvement loan is similar to any other type of loan you take out, but the funds from these loans are used specifically to help you maintain your home. Rather than paying out of pocket for renovations or putting it all on your credit cards, you can get the amount you need when you need it and pay it back later, likely with a monthly payment plan. Using a home improvement loan is more beneficial by charging your home repair projects to a credit card because the interest rates are often much lower. Your credit card might also not allow you to spend as much as a home improvement loan, which can make it difficult for larger home improvement projects. 

How you use these funds to cover your home improvement projects is up to you. It’s your home, so you should be in control over what repairs and improvements you want, not the moneylender. You can fund a variety of home improvement projects, including anything from insulation to an updated bathroom

There are two different types of home improvement loans, secured and unsecured. For a secured home improvement loan, you’ll need to provide some type of collateral. Many of these loans will use your home as collateral so ensure they receive payment. With an unsecured home improvement loan, you won’t have to offer up any of your possessions, but there can be other hurdles to get through. Because no collateral is involved, an unsecure loan can be much harder to qualify for. 

How Do You Qualify for a Home Improvement Loan?

Like any other loan, you’ll need a good credit score to qualify for a home improvement loan. What credit score you’ll need to qualify will vary from lender to lender. The better your credit score is, the better your chances of being approved for a good loan. If your home improvement loan is an unsecure loan, you should expect it to require a higher credit score. Your credit score can make a big difference in the loan you qualify for. For those with lower credit scores, you might only be approved for a low loan amount or get stuck with a higher interest rate. 

If your credit score isn’t great and your home repairs aren’t urgent, it could be more beneficial for you to put off your improvement project and work on getting a better credit score in the meantime. There are a number of ways you can improve your credit score, and what needs to be done will vary from person to person. For example, you could make an effort to get all of your bills paid on time or work on paying off debts you currently owe. 

Apply for a Home Improvement Loan Today

Taking out a loan is a big decision to make, and, understandably, that most people will have a few questions before they do it. You want to fully understand how your loan will work before you agree to it. Applying for a loan can sometimes be a hassle, but at Homeowner Funding, we work hard to make this process easy for you. We’re here to discuss your options for your home improvement plans and how we can help fund them. 
If you have questions about getting a home improvement loan, contact us today.

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Joe D.

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