Got a big project you’ve been thinking about tackling but haven’t had the funds to do it? Whether you’re facing an addition, new garage, finished basement, or updated kitchen, you can’t get anything done without adequate financial backing. If your cash is tied up in the mortgage, car payments, tuition payments, groceries, etc. (and whose isn’t?), you may want to consider a personal loan to fund your next home improvement project.
It’s a solid idea. Why? You get the cash you need to do the work, boost the value of your home, and modernize your living space, all backed by an affordable loan that you can easily repay.
Credit Direct wants to help homeowners achieve the home of their dreams. We can give you up to $40,000 in personal loans so you can remodel your kitchen with custom cabinetry, high-end appliances, hardwood flooring and granite counters. Perhaps you’re looking to expand your master bathroom with a hot tub, walk-in shower, and his-and-hers vanities. Or maybe you want to finally finish the basement so your kids have a game room to relax in with friends. Whatever the case, these projects can be made possible with a personal loan for home improvement.
Check out these five reasons why you should take out a personal loan for your next home improvement project.
- Your home is less at risk
The stakes are simply lower with an unsecured personal loan. Why? Let’s say you are unable to repay your home equity loan or line of credit. Your lender could foreclose on the property because those types of loans are secured by your home. A foreclosure is serious business and is hard to crawl out from under.
Yes, unsecured creditors could place a lien against your home if you don’t pay them back, but this will just make it more difficult for you to sell or refinance. Bankrate points out that real estate loans are non-recourse loans, which means the lender can use only the property as security for the debt; however, with a personal loan, the lender can pursue the borrower’s other assets and income sources if the loan is defaulted on.
Of course, defaulting on any loan is never wise. That being said, an unsecured personal loan is a lower risk option if you’re financially stable but facing future uncertainty, such as potential layoffs at your place of employment or a child heading off to college.
- You’ll pay less in interest
An unsecured personal loan’s repayment period is typically between three and seven years. A HELOC typically contains a 10-year draw period and a 20-year repayment period, with home equity loans giving you between 20 and 30 years to repay. This sounds good on the surface, but imagine all the interest you’ll pay over that time, even if you manage to get a low rate.
- Keep your borrowing in check
With a personal loan at a cap of $40,000, you’re not tempted to borrow more than you realistically need. A personal loan amount is fixed at the time of loan approval, unlike a HELOC, which allows you to borrow additional funds throughout the 10-year draw period. On top of that, the minimum you’re required to borrow is smaller with a personal loan, making them a better option for lower-cost home upgrades, such as new floors or HVAC equipment.
- Home equity is not a factor
If you’re under water on your mortgage or just bought a house and are seeking out a home equity loan or HELOC, you won’t be able to because you haven’t built up any equity. With these loans, you must have 10 to 20 percent equity left after borrowing.
You can get an unsecured personal loan provided you haven’t maxed out your debt-to-income ratio and you have good credit.
- You’ll pay less in fees
Personal loans come with origination fees, but you won’t have to pay application, appraisal or annual, title search, title insurance, mortgage preparation or filing fees. You also won’t have to pay points or early repayment fees like you would with a home equity loan or HELOC.
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