What are home improvement loans?
You can’t find the meaning of home improvement loans in a dictionary since there isn’t any official legal definition of it. Generally speaking, it describes borrowing money for home-related or improvement projects. It’s usually an unsecured personal loan which is used as payment for any home improvements and repairs. TGUC Financial can help you find a home improvement contractor as well as assist you with financing house improvements.
Unsecured loans do not require putting up your home as collateral. Loans typically have fixed interest rates and monthly payment. Furthermore, it can range from $1,000 to $100,000 and are available at credit unions, online lenders, traditional banks, and peer-to-peer lenders.
How do home improvement loans work?
You get to receive all funds after being approved for a home improvement loan. These received funds are what you can use to pay for your renovating projects. Once all funds are disbursed, the repayment term begins and it can last anywhere up to 15 years. Regular fixed payments on the loan should be made during this term in order to pay back the principal plus interest.
Types of Loans for Home Improvement
There are several types of home improvement loans. Listed below are the most common ones used by most homeowners.
Personal loans
Personal Loans are unsecured loans which can be used for any reason. Your credit score will be the basis of interest rates and providing collateral is not required. It can be a wise choice for those that want to avoid using their houses as a means of securing a loan.
Home equity loans
Home equity loans are lump-sum loans which are often used for reasons associated with home projects and needs. It is a loan where your home is used to secure one. Therefore, interest rates can usually be lower than those with a personal loan. However, facing foreclosure may be a consequence in case you miss your payments. This interest paid on these loans is tax deductible.
Home equity line of credit (HELOC)
A HELOC loan is a revolving line of credit. You can draw on it for home-related expenses as much as needed instead of as a lump sum. As collateral for a HELOC, your house is still used so you can also get lower interest rates. These loans also have tax-deductible interest.
Which Home Improvement Loan is the Right One for You?
Below are some questions you can consider in deciding which home improvement loan is right for you and your project. However, always keep in mind that it is still advisable to consult with a financial advisor if you need a hand, especially if you have a very costly project in mind.
- “Do you have equity in your home?” Otherwise you won’t be eligible for a home equity loan or HELOC.
- “How important is it to get quick cash?” Personal loans provide faster funding compared to HELOCs and home equity loans.
- “How good is your credit?” Having a not-so-great credit may make it difficult for you to get an unsecured personal loan than a secured home equity or HELOC.
- “How important is it to save money?” As mentioned above, home equity loans and HELOCs often have lower interest rates compared to personal loans – but considering closing costs is still a must.
- “Do you need your money in one lump-sum or over time?” A home equity loan or personal loan may be more suitable if you’re planning on paying all of the total project cost at once, while HELOC lets you use credit as much as you need for a large project that’s done over time or for multiple projects that won’t be done all at once..
Common Home Improvement Loan Uses and Costs
Home improvement projects can either be cheaper or more expensive than you expected and may include everything from replacing cabinet hardware to building an addition to the house. Estimating the total expense of the project you’re planning before applying for the loan will be a difficult but wise move. Especially if it’s for a large project, you’ll be less likely to run out of funds in the midst of the duration of the project if you have already done some budgeting.
According to the 2020 Cost vs. Value Report from Remodeling Magazine, this is roughly how much homeowners spend on common home improvement projects:
- Garage Door Replacement—$3,695
- Minor Kitchen Remodel/Renovation—$23,452
- Major Kitchen Remodel/Renovation —$68,490
- Wooden Deck Addition—$14,360
- Vinyl Siding Replacement—$14,359
- Entryway Door Replacement—$1,881
- Asphalt Shingle Roof Replacement—$24,700
- Building a new master suite addition—$135,547
- Manufactured Stone Veneer Addition Around the House—$9,357
TGUC Financial Home Improvement Loans: Why We’re Better
TGUC Financial can help you find a home improvement contractor as well as assist you with financing house improvements. TGUC Financial has loan opportunities for homeowners across the credit spectrum. If you are a homeowner and you need a home improvement loan, we can compete with other financial institutions and offer you a loan. Whatever your credit score, contact us today.
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