No matter whether you want to make a couple of upgrades or make an expensive new addition, if you don’t have enough money for this, you would like to take out the best home renovation loan. When writing our review, we searched for a mix of low home improvement loan rates, great scores for customer service, and terms that are easy to understand.
If you have equity in your home, it’s quite easy to get the needed funds. If you use equity as a collateral, you will get funds for a low APR – but it means that you will put equity in the first place.
There are also pros and cons of the loans for home improvement. We will talk about them later.
There are two main types of loans for improving your home: the first is home improvement loan and the second one is home equity loan.
Home Improvement Loans
If you ask yourself “How do home improvement loans work?” , we will answer your question. These loans are usual personal loans used for improving your home. The same way as home equity loans, their interest rate is fixed and the repayment terms vary from 3 to 5 years.
Such home improvement loans with no equity can be both secured and unsecured. If you want to take out the secured one, you will have to back it by a collateral. In case of the unsecured ones, you don’t have to do it. However, to get a low APR, your credit score should be decent.
Home improvement loans are incredibly simple. It is possible to get funds quickly. As a rule, an origination fee is 5-6%. But there are no closing fees and costs that equity loans have.
The main disadvantage is that your project on home improvement will define whether you will be approved for the amount needed or not. There are more chances to get a loan from a big bank.
The Best Home Improvement Loans
The home improvement loans rates of LightStream are hard to beat. The APR starts at 4.99% with AutoPay. The amount borrowed is limited to $100,000. The interest is the only fee charged.
The problem is that it is hard to meet home remodel loans standards to qualify. You should have a substantial income, good to excellent credit, and good credit history. The loan you get from Lightstream can be used for improving your home only.
Avant deserves the attention of people whose credit is not that good. It is ready to issue home improvement loans with bad credit. The APR ranges from 9.95% to 35.99%. Loan amounts start from $2,000 and can reach $35,000.
It provides a quick access to funds, and you shouldn’t state why you want to get a loan.
Think about home remodeling loans if:
- your home equity is not enough to borrow against;
- you realize that credit score will define the interest rate;
- you need a single loan for a smaller project;
- you will be capable of budgeting for the same payment each month.
Home Equity Loans
This type of loan shouldn’t be mixed with the previous one. The home equity loan is the one secured by the equity in your home – it is the difference between what you owe and the home’s market value.
If your equity is big, home equity loans can be a nice option for those who want to invest costly repairs. You will get a lower APR than with home improvement loans.
First of all, you should have an equity to apply for this loan. Another disadvantage is that you put your home at risk if you fail to do payments in time. The closing fees and costs will be close to ones on your primary mortgage. This can make your loan 5-6% more expensive.
The Best Home Equity Loans
This bank is known for its low interest rates and the site’s transparency. After getting the rate quotes, it is easy to read disclosures about rates and fees. U.S. Bank scores high marks in customer service. This bank has roughly 3,200 branches all over the U.S. There is an option of online chat if needed.
Bank of America
The bank offers 4.15% APR. You cannot change the term on the bank’s rate generator to see how the rate changes depending on the term.
The Bank of America has one unique feature: it proposes loans with a fixed rate for the term of 3 years.
Consider a home equity loan if
- your home equity is enough to borrow against;
- you need a single loan for one project;
- you want to have a secured fixed interest rate;
- you want to budget for the one and the same payment each month.
How to Look for Home Renovation Loans
- Borrowed the needed amount for the right reasons
Think about your reasons before applying for remodeling loans. Before taking out a home improvement loan, consider how much you need to finance your project.
If you don’t want to get into financial troubles, don’t borrow more than you need.
If you’re a vet, it is also possible to apply for home improvement loans for veterans.
- Shop around
Consider all the available remodeling loans. Never sign the agreement with the first lender you find. There is a sense to consider other low interest home improvement loans.
You can turn to loan-connecting providers to save your time and money. They will compare all the home repair loans and advise you the best one.
Ensure that You Have a Solid Credit
Your credit score defines home improvement loans interest rate. If you don’t secure a loan with equity, the lender takes more risk. That’s why he wants to feel secure and increases the interest rate. It is not easy to increase the credit score but it can help you save so much that it’s worth trying.
Before starting a research, evaluate whether the improvements you want to make a really worth it. If you’re set on your project anyway, think about how to refinance it. Home equity loans are the cheapest option. However, in some cases, home renovation loans make sense as well. Check all the potential pitfalls before deciding on a particular kind of a loan.
P.S.: Learn how to save on appliance repair.