Monthly Archives: August 2015

Pros and Cons of using personal loans for home improvement projects

If you have emergency repairs to make on your home or other property that you own, such as a cottage, cabin or vacation property, a home improvement loan may be just what you need. A home improvement loan is in many cases an unsecured personal loan. These loans are intended to be repaid in one to five years. There is also home equity loans, but these loans tap into the equity of your home, and carry the risk of a lien or losing your home should you run into financial hardship. In the past homeowners had home equity loans as their only option when it came to loans to repair their home, or to have upgrades built on their home.

Home improvement loans carry less risk to the property owner. I should point out however that you do pay for taking less risk via higher interest rates. Since home improvement loans are not secured, the lender needs to charge everyone who takes out one of these loans a higher rate of interest to make up for the eventual charge offs that will invariably occur among the total number of borrowers. In exchange for a higher interest rate, your home equity is left intact, and there is no risk of losing your home should financial hardship strike when you least expect it.

Another benefit of a home improvement loan is that much like personal loans, they do not require perfect pristine credit to obtain. While you cannot have terrible credit and obtain one of these loans, you can have a few credit blemishes and still be approved for one of these loans. Applying for these loans is also much easier with much less paperwork involved. Usually you only need to prove income, have a social security number and a credit score of 620 or higher. 620 might seem like a high number to some, but it is not, 620 is OK credit with a few credit blemishes. The approval times for these loans are also much quicker than home equity loans, in most cases you can have your cash in hand in a week or less, where as a home equity loan can take weeks to accomplish.

You can obtain these personal home improvement loans from many lenders. Your local bank may offer these, but banks do not always give the best deal interest wise. If you do business with a local bank, they may have a deal for you, but you should still rate shop. If you belong to a credit union this would be your best bet since credit unions often offer the lowest rate due to being not for profit. You can also locate a good deal from online lenders, many of which we review on this website, giving you their interest rate ranges, credit requirements, and pros and cons. As always do your homework before taking out any loan, and make sure that you are getting the best possible rate, with terms you can live with. Finding the right personal loan does not need to be difficult, in fact today with the wide range of information online, obtaining a personal loan has never been easier.