A loan can save your day if you are facing a tough financial moment. It can also help your dream become a reality. However, getting a loan is not always a walk in the park. You need to find a good lender, decide on the best loan to go for as per your needs, and go through the loan application process before you can get the money you need. Getting a home improvement loan is similarly not easy, but Money Lender Loans is here to make things easy and quick for you. We help people in Orange County with professional lending services that will save their time and money in the long-run.
An Overview of Home Improvement Loans
Home improvement loans are a type of credit that homeowners acquire for various reasons, such as updating their homes, remodeling, and repairing any damage within their homes. Homeowners have access to all kinds of home improvement loans, and can, therefore, get a loan for simple things like roof repairs, a new addition to their home, or updating an economical heater. The terms for these loans differ greatly based on the type of loan you have applied for and the amount of money you have been given on credit.
Homeowners also have access to secured and unsecured home improvement loans. If you have a valuable asset like a home, for instance, you may be given a good loan for upgrading your home at good rates with no issues at all. Some homeowners will use their home equity as collateral to apply for a secured loan with favorable terms. Other homeowners go for mortgages or subordinate loans. Every case is unique. Thus, homeowners seeking a loan for home improvement might want to consider various loans before settling to one that is suitable for their situation.
Home improvement loans for homeowners with no or little equity in their home
The type of home improvement loan you can apply for today is mainly dependent on the kind of collateral you need to secure that loan. As mentioned above, there are both secured and unsecured home improvement loans on the market.
If you are a homeowner in need of upgrading, repairing, or improving your home, but you have no or little equity in your home, you might benefit from an unsecured loan. This is because minor repairs and upgrades to the home are not sufficient enough to increase the value of your home so you can use it as collateral for a better loan. Note that an unsecured loan will attract higher interest charges than a secured loan, but the loan will come with lower closing costs than most mortgage loans.
If the loan you are seeking is for doing major remodeling or repairs in your home, there are several options for a homeowner who has little or no equity in their homes. If you were able to get a mortgage at a low-interest rate and it is your first mortgage, you can always go for the second home-loan to continue enjoying the same flat interest rate. However, if the rate of your current mortgage is more than the standard rate, you can opt for refinancing under renovation loan, to benefit the lower rates. Either way, the loan lender will want to see the remodel or repair plans and use them as the base for appraising that home’s value after repair or improvement.
The advantage of the second mortgage and refinancing is that the loans come with lower interest charges when compared to unsecured loans. However, be prepared to pay more on closing costs. To make the best choice between the two, you need to think of the increased value of your home after improvement, because this is what loan lenders will consider before giving you a maximum amount of loan.
Home improvement loans for homeowners with more equity in their home
For a homeowner with higher equity in their homes, it is not a good idea to go for a loan that is not guaranteed or a line of credit, even if you only need a small amount of money for minor updates and repairs. Since the amount of money you need is small, it might help to consider a small loan with no or low closing costs. An unsecured loan will be charged at higher interest rates when compared to a home equity line of credit, and the latter can be used again if there is a need.
If, on the other hand, you need a more substantial amount of loan for major updates, remodeling, or repairs, your home equity will help a great deal. Any loan lender will agree to give you the amount of money you need in several ways. You will, for instance, be able to get a home equity line of credit, a cash-out refinance or an installment second mortgage. It is your financial situation and the desired outcome that will determine the type of credit you will go for. A line of credit or a second mortgage will be the best if you want to maintain your current interest rate. These alternatives will also have lower closing costs. If, on the other hand, you need a loan that will boost your cash flow, the cash-out will be the best option.
Reasons Why You Might Need a Home Improvement Loan
Loans can be expensive at times, which is why saving up is always a better way to cater to your financial needs. Paying for home improvement in cash is, for instance, the less costly option homeowners have.
However, some needs come as an emergency, and waiting to save up enough money to cater for such a requirement might worsen the situation. A homeowner in need of funds to cater for emergency roof repairs will, for instance, find a loan least expensive other than waiting up to save enough money when their roofs are leaking, causing molds and damaging ceilings. This is because the damage after months of savings might cost more money to repair than if it was fixed as soon as the problem was detected.
Again, a simple modification to a home can bring greater comfort and make it more livable, which is a good thing even if it means that you have to apply for a loan to make that change. Some people find it more expensive to move when they can make their current home better through simple repairs and renovations. When you are unable to postpone making a significant upgrade on your home, borrowing some money for minor upgrades here and there makes sense, and then you can repay the loan over time.
Most homeowners know that their homes are more than a simple investment. A home is an asset that can help you in so many ways. Home equity is, for instance, a value that builds up in that home, which can be useful to you in more ways than one. Home improvement is one way through which you can help build that equity to make your home more valuable. A home improvement loan is, therefore, not just a loan to improve the way your home looks and feels but also a great way to gain more equity on it.
The Best Options for Home Improvement Loans Today
To get the above and more benefits, you need to make the right choice of a home improvement loan. It is crucial to start by knowing the available options on the market today, so you can choose wisely the option that best suits your situation. The best options available include:
Traditional Loans for Home Improvement
Through a traditional loan, a homeowner can borrow a large sum of money that can cater for the labor and all the materials that will be needed to complete the home improvement project he/she has. Some of the projects that can be funded through a traditional home improvement loan include bathroom and kitchen remodeling, installing a swimming pool in your backyard, or even replacing an old and dysfunctional HVAC system.
Traditional loans are offered by traditional lenders such as credit unions, online loan lenders, and traditional banks. In most cases, the loans are unsecured, which means that a borrower will not be required to have any collateral to get the loan. For that reason, these loans come at a very high-interest rate, higher than you can get on a guaranteed loan.
Traditional loans differ in the way that they are charged, based on the loan lender, the applicant’s credit rating, the amount of money borrowed, and the repayment term.
Personal Lines of Credit
A personal line of credit is a type of loan that a borrower uses the same way you use a credit card. A loan lender will approve the entire amount of loan you have applied for at once, but the borrower will pay interest only on the amount of money they use. This is the best loan to go for if you want to borrow money on increments like it happens when you have a home improvement project, and you need money to pay contractors. Line of credit type of loan helps a homeowner to avoid borrowing more money than they need since the cash is only accessible when it is required.
However, this may be a problem for a borrower who does not keep track of their borrowing. Such a borrower might end up with more loans than they intended to take. Again, the small draws allowed to a borrower on the credit line may leave him/her with a large total amount of loan in the end.
The advantage of this type of loan is that the repayment term is usually shorter than the time you get to repay a home equity loan. This means that you might end up paying less in interest over time, but monthly repayments could be higher.
Personal Loans
Personal loans are quite similar to personal lines of credit. Personal loans are a way for borrowers to get large sums of money as a loan, which can be spent for any need whatsoever. Personal loans can be used to pay for holidays and vacations, start a business, consolidate debts, and so much more. Personal loans do not require any collateral and will, therefore, not put your property or any other asset at risk. However, for a homeowner that wants to get a loan at a low-interest rate, or a more substantial amount of loan, you may opt to secure it other than applying for an unsecured loan.
Personal loans are affordable since loan fees are low, and one can get the amount of money they need even if they do not have any equity in their home. The other advantage is that personal loans are processed very fast and so, you can get on with your project as soon as you want. The repayment term for a personal loan, just like a personal line of credit, is short. Thus, a borrower will be out of debt in no time. You might have to pay more as monthly repayments.
Peer-to-peer Loans
A peer-to-peer loan is another way through which a homeowner can get funding for their home improvement. In this type of lending, your home upgrading project is funded by several investors who contribute small sums of cash to different types of loans to spread their risks. The borrower is required to make a single monthly repayment, just like they can do in any other credit.
Just like with other types of loans, the interest rate charges on peer-to-peer loans are based on a borrower's credit rating, the amount of money they want for their home improvement and the repayment period. Generally, these types of loans have shorter repayment terms of between three and five years. The advantage in this is that the borrower can get out of debt as quickly as they want. The other benefit of peer-to-peer loans is that anyone can be eligible, even if your credit rating is not high. However, people with a low credit score will be charged more on interest.
Home Equity Loans
A home equity loan and a home equity line of credit are two of the most popular credits available for homeowners seeking to finance their home improvement and willing to take a loan that will take a much longer time to pay back. The good thing with these two types of loans is that they have low monthly repayments and lower interest rates and thus, are the least expensive options for homeowners. The loans are also secured by the home that needs improvement. The interest rate is usually tax-deductible, but only if it is itemized by the homeowner.
There are disadvantages to home equity loans, though, the first one being a slight possibility of losing one's home once they take this loan. If a homeowner is unable to repay the loan, the loan lender may foreclose the home. Again, it can take 20 or even 30 years for a person to repay a home equity loan. This means that the loan can, in the end, cost more in interest rate than a loan with a shorter repayment period, even when the latter has a higher repayment rate.
However, with a home equity loan, a homeowner can borrow a large sum of money at once. With a home equity line of credit, you draw cash on the line of credit as required for a specified period. The borrower will only pay interest on a loan they have acquired within that draw period.
Cash-out Refinance
With cash-out refinancing, a homeowner gets a new loan for home improvement to replace the mortgage loan they have. However, other than applying for the same sum of credit you already have in a mortgage, you apply for more to cater for your home improvement. A cash-out will increase the number of months or years you have to pay back the original loan.
The advantage is that it allows you access to a home improvement loan at a possibly lower interest rate. Cash-out refinance usually require borrowers to keep some of their home equity after acquiring the loan, mostly 20% of the equity. This means that a homeowner seeking this type of loan will require more equity if they want their loan application to be approved. The other requirement is that the borrower will need to be in employment, to have a decent credit rating and be able to satisfy all the elements required in getting a mortgage.
Find a Home Improvement Money Lender Near Me
Home improvement is necessary if you want to upgrade the look and feel of your home or its value. Home improvement loans come in handy as a way homeowners can use to finance their home improvement projects if they are not ready to save up and wait to do it later. Money Lender Loans is a direct lender in Orange County that offers competitive rates and fees, fast approvals, and minimal paperwork, among other benefits. Call us at 949-409-4372 for advice and guidance in getting a home improvement loan that meets your needs.
