There are times when you want some home improvement but do not have the sufficient funds. You might want to renovate your old home or you might have just bought a home that needs improvements. Whatever is the case, you can avail a home improvement loan for this purpose. There are many options, some better than others. Following are the 4 options that you can consider according to your circumstances.
1. Home Equity and Home Equity Line of Credit (HELOC)
A home equity loan is very similar to a mortgage where you use your property as a collateral and avail a loan. You can have a certain lump sum amount of loan as home equity loan or you can have a line of credit. In home equity line of credit, you have a certain limit and withdraw funds according to your requirement within your credit limit. Interest rates are quite affordable for this type of loan.
In the case of refinancing, the bank pays your outstanding mortgage and approves a new loan with a bigger amount. You can spend the additional funds on home improvement. The advantages of refinancing include low interest rate and having to deal with only one loan.
3. Federal Housing Authority Loans
These home improvement loans are secured through Federal Housing Authority and offer lower interest rates and easy approvals. You have to meet certain requirements in order to avail these loans. The Department of Housing and Urban Development offers Title I program, and you can get twenty-five thousand dollars or sixty thousand dollars for home improvement depending on the size of your home.
4. Unsecured Loans
These home improvement loans include personal loans from banks and credit unions. These are called unsecured loans because they are not secured by any collateral. Because they involve higher risk for banks, the interest rate is quite higher as compared to secure loans.