Home improvements loans refer to the personal loans. So, they are not secured over your assets. Furthermore, they are short-term – you have to repay them within five years maximum. Of course, if you have no opportunity to pay off the debt within five years, you should negotiate with your lender and find a reasonable solution.
Considering a personal loan for home improvement makes sense if you:
- have not much equity in your home;
- need between $2,000 and $35,000 to make the home improvements;
- are ready to pay off the debt in 1 to 5 years.
If all aforementioned statements fit your situation, then unsecured personal loans for home improvements are suitable for you.
Home improvements loans are unsecured. Therefore, an interest rate depends on your creditworthiness. If you have a regular income and good credit score, you are almost about to get an approval. Interest rates are fixed. So, you can plan your budget and understand what size of the monthly payments you can afford.
The loan term of the personal loans is smaller than home equity loans (from five to twenty) or HELOCs (up to 10 years) offer.
The interest rates for home improvements loans are also higher – they range from 4% to 36%. Note that interest rates for home equity and HELOCs loans are now less than 10%.
Remember that you can’t claim a tax deduction for home improvements loans as you can do with a mortgage.
There are different pitfalls for personal loans used for home improvements. Still, if you don’t want to deal with paperwork and need money fast, personal loans are the right choice.