Looking to repaint your home, remodel your kitchen, or finance emergency repairs around your house? Let’s be honest, this “little” home improvement projects can be really pricey, especially if your goal is to ensure you don’t have to keep repairing to acquire more expenses in the long run.
You have various options to finance your home improvement, but our advice is to take out a loan because paying its interest is more practical than going the cheaper route and opting for band-aid solutions. To help you choose the right loan for you, here are the best kinds based on your needs and financial status:
Traditional Home Improvement Loans
These are unsecured loans that allow homeowners like you to borrow a lump sum to finance expenses specifically for home improvement. These include labor costs and equipment or materials needed to renovate or remodel your home. However, since they’re unsecured, banks and online lenders who offer these loans don’t require any collateral. Which then results to considerably higher interest rates.
Do note that your credit score, loan terms, and actual amount borrowed will also affect the interest rate.
Personal Loans
Unlike home improvement loans, the amount borrowed can be used for any purpose. You can use these for starting a business, pay for debt, or even for financing your travel plans. You also do not need to provide a collateral and you don’t have to worry about putting your assets at risk.
You can choose between an unsecured personal loan and a secured personal loan. In this case, we suggest opting for a secured one to get a higher loan amount and/or smaller interest rates.
Personal Line of Credit
While highly similar to personal loans, a personal line of credit allows you to borrow a line of credit you can have access to consistently for a certain period of time — instead of a lump sum. This type of loan is perfect for borrowers who are worried about borrowing more than they need because they can choose to only access the cash when they need it.
Just do be mindful of the amount you’re borrowing over time so as not to be shocked in the long run.
Home Equity Loans
A lot of people choose home equity loans when borrowing for home improvement. Repayment periods are long and monthly payments are low. You can expect low interest rates because you are required to use your assets or your home as collateral.
Be extra careful with payments when you go for home equity loans because if you fail to pay, the lender can opt to foreclose your assets.
With all these options, it’s important to assess your priorities and your credit score to make sure the loan you go for doesn’t end up becoming too much for you and your family. Remember that the goal here is to build a home not ruin it because of money problems.