Understanding home improvement loans & how they work

Home improvements and renovations can be costly. Securing a home improvement loan is a great way to obtain financing for your home improvement project.

There are many home improvement financing options available on the market. The typical rate of these loans land around 3 percent to 36 percent. Comparing the interest rates and other factors of these loans can help you determine the best option for your home.

Defining a home improvement loans

Some home improvement loans are unsecured personal loans. These funds are allotted to help pay for the cost of home improvement projects. These projects can liven the space and even increase curb appeal. 

You don’t have to offer collateral to secure financing. These loans are based on personal information such as income and credit score. 

Home equity loans use your home to secure the financing. Typically, the interest rate is lower on these loans in comparison to an unsecured loan. Home improvement loans can be secured through your personal bank, online lenders and credit unions 

How does a home improvement loan work? 

Home improvement loans can be used for many home renovation projects. They can be used to update your kitchen or repair damage after a severe storm. These funds are granted specifically for home remodeling and improvements. 

Comparing home improvement loans

With so many choices of loans on the market, how do you choose? Some of the best home improvement loans have low APR rates and don’t penalize for a late monthly payment.  Calculating how much your home renovation costs will help pick the right loan. Some lenders have a max cap on their loan options. 

Acquiring home improvement financing 

Once you have compared loan options and have found one of interest, there are some additional steps to take. See if you pre-qualify for the loan. A simple form is usually provided that asks for your personal information. This can include your credit score. An excellent credit score is more likely to result in a better interest rate and increased loan amount. 

If the credit score is lower, having a co-signer can help you to secure the loan. A co-signer can also help to secure an agreeable interest rate. Once you have qualified for the loan, gather all required paperwork. This may include proof of address, pay information and more. 

Acquiring financing for home improvements can ensure you have the resources needed to make your project happen. Home renovation can boost the appeal of your space. If you would like to learn more about these loans, compare local options for the best option for your household.