There are many different ways to borrow money for a home improvement project, but essentially your options come down to a “secured” or “unsecured” loan. These two types of loans have advantages and disadvantages.
An unsecured loan is a loan which is not “secured” against any object of value and isn’t held up with any sort of collateral. Many banks will give an unsecured loan for home improvements based on a person’s credit rating. A hardware store credit card is actually an unsecured loan. You often get an unsecured loan if you have a steady job. You can even get an unsecured house improvement loan when you have almost no home equity.
Hardware store credit cards are good to use for small home improvement projects that are under $1,000 because the application process is usually fairly simple. These credit cards are the most common types of unsecured loans for house improvements. You can sometimes qualify for a zero percent interest rate on some cards for a few months.
Secure loans are loans in which the bank has some sort of collateral or item which they technically “own” until you pay it off. When you finance a motorcycle or buy a house with a mortgage the bank technically owns what you bought until you’ve paid off the debt amount plus interest. With a secured home improvement loan your house is the collateral. If you default on your loan then the bank can take your house or car and sell it in an effort to regain some of the money they lent you.
Secured house improvement loans often have more paperwork but they also usually offer a lower interest rate because they are more safe for banks to give out due to the collateral involved. There is often more paperwork and a longer delay associated with secured loans because they are so much larger than most unsecured loans. Depending on your tax situation you may even be able to deduct the interest you pay on your house improvement loan from your income tax returns.
Both secured and unsecured house improvement loans have a purpose and can really help you upgrade your home if you don’t have the money needed readily available. Be sure to do your homework and make sure you can actually pay back the loan on time.
Want to discover more about how you can pay for that home improvement? Be sure to read about some more home improvement loan options that are available.
categories: home improvement loan,secured loan,unsecured loan,home improvement financing,loans,money,finance,home improvement,finance,banks
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