Is a Personal Loan Right for Your Home Improvement Project?
Get started on your home improvement project sooner with the proceeds from a personal loan.
Thinking about remodeling the kitchen or adding a patio in the backyard but you’re not sure how to pay for it? A personal loan could be just what you need to get started!
Using a personal loan to finance a home improvement project is a great tool for funding these projects without dipping into your savings.
Personal loans also tend to offer faster and more flexible funding than some other options available, such as a home equity loan.
Personal loans may help finance your home improvement projects without causing you to dip into your savings.
Be sure to compare your loan options to make sure you’re getting the rate, repayment terms, and amount that meet your project’s needs and fit your budget.
Depending on the lender you choose, you may receive funds as soon as the next business day, allowing you to get started quickly.
Personal Loans for Home Renovations
Personal loans are popular for financing home improvements and renovations because their application processes tend to be quick, and funds are often distributed within a few business days.
When using a personal loan for a home improvement project, you submit an application for a specified amount of money. If your loan is approved, you receive a lump sum that you could use to pay for the project.
Personal loans are typically unsecured, which means they aren’t guaranteed by any type of collateral, such as your home. Additionally, personal loans come with predictable monthly payments and often have fewer fees than a home equity loan or home equity line of credit, which could require closing costs or appraisal fees.
Using a personal loan may help you keep project spending in check since you are able to readily see how much of the personal loan proceeds have been spent and how much is left. This differs from using a revolving line of credit, like a credit card, where you regain access to the credit once you’ve paid off some or all of the balance.
If you’re considering a personal loan, take some time to compare options. Online lenders often let you check rates and repayment terms before fully committing to the application, allowing you time to find the best loan for you.
Should you choose to pursue a personal loan, many lenders offer online applications that allow you to be approved and receive funds in as little as one business day!
Credit Cards are Another Option
Depending on the size of your project and the lines of credit available to you, a credit card may also be a viable funding option for your home improvement project.
Credit cards may allow you to pay for materials and labor quicker than a personal loan if you already have a card available to you. If you do choose a credit card as your payment option, be sure to consider the rates and any processing fees you may get charged.
Remember that credit cards tend to have higher rates than personal loans or home equity loans, so if you use this financing method, you may end up paying more in interest over time.
Comparing Home Improvement Loans
Finding the right home improvement loan is just as important as finding a trustworthy builder or contractor, so you’ll want to do your research.
As you investigate home improvement loans, you should know that this term refers to any loan taken out to pay for renovations. As you research your options, there are a few factors to keep in mind, including:
Rates: One of the first things to look at when comparing your loan options is the rate being offered. Your rate may be impacted by factors like your credit score and the repayment term you choose.
Repayment Terms: Different lenders offer different repayment terms, including the amount of time you have to repay the loan and the monthly payment amount.
Loan Amount: Consider how much your project is likely to cost and borrow accordingly. If you borrow more than you need, you may end up paying more interest than necessary.
Fees: Some lenders charge fees, such as processing or origination fees, when you take out a loan. Look for lenders that offer the least fees to help save money.
By keeping these considerations in mind as you research your financing options, you should be able to find the best loan option for your project.
Should I Get a Personal Loan or a Home Equity Loan?
When it comes to choosing a home renovation loan, it may be difficult to choose between a personal loan and a home equity loan.
Home equity loans share some similarities with personal loans, but they also have a number of differences. For example, unlike personal loans, home equity loans are secured using your house as collateral, meaning you have to have some ownership in your home in order to access this financing option.
Typically, lenders allow you to borrow between 80-85% of the house’s value, minus what you owe on the mortgage. For example, if your home is worth $300,000 and you owe $225,000 on your mortgage, you’d likely be able to borrow between $15,000 and $30,000.
Home equity loans also tend to have more fees and requirements than personal loans. For example, they may require you to have your home appraised and/or pay closing costs when finalizing the loan, reducing your proceeds.
That said, since home equity loans are secured, they may offer lower rates than personal loans.
When it comes to choosing between a personal loan and a home equity loan for your home improvements, it’s useful to think about your specific circumstance. Here’s a quick comparison of the two loan types and who they may work best for.
Doesn’t require collateral or equity in your home
May have higher rates than home equity loans
May have higher monthly payments and/or shorter repayment terms
People who don’t have much equity in their home
Home Equity Loan
Interest may be tax-deductible – Consult a tax advisor
Approval often takes weeks
Your home guarantees the loan
May have to pay for an appraisal and/or closing costs
People who have equity in their home
Large projects that could improve your home’s value
Using a personal loan to pay for renovations and upgrades may be a great way to help you get the house of your dreams.
As always, it’s important to do your research and vet all your lending options before uploading an application to make sure you’re making the right decision for your unique situation.