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The best personal loans for home improvement modifications are often directed toward kitchen remodels, bathroom upgrades, or landscape enhancements. If you need to secure a loan for a Home Improvement, you can benefit by choosing personal loan companies that specialize in this type of lending product.
What Is a Home Improvement Personal Loan?
A Home Improvement personal loan offers a convenient way to pay contractors when renovating your home. This type of personal loan can be directed to the following improvements:
Replacing a roof
Upgrading a kitchen
Enhancing a backyard
Adding a pool
Improving a bathroom
Adding a room
Constructing an additional building
Adding major appliances
Installing a furnace, air conditioning, or water heater
Switching out faucets and showerheads
Tiling or carpeting a floor
Painting or redecorating a house
As you can see, you can use a Home Improvement loan for a variety of home improvements. Plus, the funding can range from $2,000 to $30,000 or more. What you spend will be based on the amount of work you want to be done and the materials you choose. Therefore, it is a good idea to already have a plan in place before you take out a home improvement loan – a plan that will allow you to see exactly how you will spend the loan proceeds.
To apply for a Home Improvement personal loan online, you can usually take out an uncollateralized loan, or a loan that does not have to be backed by collateral. While our rates may be a bit higher, it will also take less time to pay back the loan. Depending on your credit score, the APR you pay on a Home Improvement loan can span between 6% and 20%. You do not need to have a perfect rating to secure a Home Improvement home loan. You just need to show you can repay the loan amount.
Home Improvement Loan – How to Get Started
To apply for a Home Improvement personal loan, you will need to take the following steps.
Check Your Credit Score. When you apply for any type of personal loan online, you need to review your credit score first through the 3 credit bureaus. Because your Home Improvement personal loan is primarily based on your credit score, knowing the score will help to determine the APR you will be charged.
Select Your Loan Type. Some companies specialize in Home Improvement loans, so it is better to go through them if you want the best rates for funding.
Get Prequalified for Home Improvement loan financing. When you choose several lending providers you like, you will need to get prequalified for your Home Improvement loan next. Doing so will give you the repayment details and terms for your Home Improvement online personal loan. If you agree to shorter loan terms, you can get a lower fixed APR.
Compare the Lenders. After you have had a chance to get prequalified through different Home Improvement loan funders, you can review their Home Improvement loan terms and APRs, and see which one fits best with your lending or personal budget needs and requirements. For a Home Improvement personal loan, try to stick with a lender that offers the lowest APR and features the lowest fees.
Supply the Necessary Info and Documents. When you choose a lender, you will need to provide the required loan documentation and information for Home Improvement loan funding. In this case, you need to supply the following details and documents:
Personal Identification (Social security card, passport, or driver’s license)
Proof of earnings or income (W-2s, paystubs, or filed tax returns)
Employer information (Name of company, manager’s name, and phone number and address)
Proof of residence (utility bill with your name and address or a lease agreement)
Apply for the Loan and Start Making Payments. After you apply for your Home Improvement personal loan and start making payments, you might add some extra money to each payment each month to repay the loan faster. Doing so will make the loan repayment smoother and quicker.
Home Improvement Loan Financing – What You Need to Know
To take out a Home Improvement personal loan, you should be aware of the following terms:
Annual Percentage Rate (APR) – The rate of interest charged on a Home Improvement personal loan, expressed at a yearly rate.
Application Fee – The amount a lender charges for processing a Home Improvement loan application and the related paperwork. These fees are usually non-refundable and may or may not be included in processing a personal loan.
Debt-to-Available Credit Ratio – When considering you for a Home Improvement loan, a lender may look at your debt-to-available credit details. This represents the money you owe compared to the credit available through credit lines and credit cards. Therefore, the debt-to-available credit ratio shows how much available credit you are using. The higher this percentage, the riskier you appear to a lender.
Debt-to-Income Ratio – The percent of your monthly pre-tax income that is being used to pay off debts, such as auto loans, credit cards, and student loans. Lenders assess 2 key ratios. The first ratio is a front-end ratio or the percent of monthly pretax earnings spent on your house payment. The second percent is a back-end ratio or the other debts that are factored into the house payments.
Late fee – A fee charged to home improvement loan customers who pay a payment late or pay less than the required monthly amount.
Late Payment – A delinquent payment or a failure to pay on a loan before the agreed date. A late payment can hurt your credit score for as long as 7 years.
Home Improvement Lender – The financial institution that provides a Home Improvement loan for renovations.
Net Income – Your income after taxes have been deducted. It is also called your take-home pay. This is the amount considered by a lender when assessing your ability to repay a loan amount.
Prepayment Penalty – A fee charged by a lender when a borrower pays off a loan before its scheduled term. Usually, prepayment penalties are not applied by standard lenders. If you are taking out a subprime Home Improvement loan, you need to read the loan terms carefully, as this fee may be applied.
Lien – A claim made against a person’s property—usually as security for a debt that is placed by a home improvement contractor who has not been paid for their work.
Housing Expense Ratio – The percent of your monthly pre-tax income that goes toward the payment for your house. Also called a front ratio, this percentage should not go over 28%. It can be helpful to know this number if you plan to upgrade your house and take out a Home Improvement personal loan.
FAQ on Home Improvement Loans
Do I have to have an above-average credit score to take out a Home Improvement personal loan?
You can take out a Home Improvement personal loan even if you have subprime, or below average, credit rating.
What is the best way to locate a Home Improvement lender online?
Determine what you can afford monthly and review the offerings of the lenders above to see which provider offers the best rates.
What will determine my final installment payment for a Home Improvement personal loan package?
Getting a Home Improvement Personal loan is dependent on your credit rating, history of payments, employment, current earnings, credit utilization, and your debt-to-payment percentage.
What do I need to put down to obtain a Home Improvement personal loan?
For a Home Improvement personal loan online, you will not need to put anything down for a non-collateralized personal loan. However, check out the loan terms carefully, as you can always pay off the loan early if there is no prepayment penalty.
What types of lending products are featured for Home Improvement loan products?
You can get secured and unsecured Home Improvement financing. However, it is best to stick with a non-collateralized loan. For example, if you take out a collateralized loan, such as a home equity line of credit, you can place your house at risk.
What is the average interest rate for a Home Improvement personal loan?
An average interest rate ranges from 12% on the low end to about 20% on the high end.
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