Home Improvement Loans
Put together your budget, learn about your financing options, and understand what you are signing for in your work and loan contracts.
Using a Personal Loan for Home Repairs or Renovations
These kinds of loans help pay for major repairs like fixing the roof or replacing the heater, or even home renovations. Here, we mean a personal loan used to pay for a home project. Another option is borrowing against your home's equity, either as a lump sum or through a credit line.
Many personal loans are unsecured and have fixed payments; check the specific offer. The amount you can borrow is dependent on the lender and your financial situation. Work out how much your project costs before accepting an offer, as some lenders only provide a portion of the total cost of a project.
Set the Project Budget Before the Loan Amount
Make a distinction between repairs that are needed to keep your home safe and prevent additional damage, and renovations that are not necessary and can wait. Consider doing renovations in a staged manner. Even if the renovations are necessary and worthwhile, borrowing incurs additional costs. A renovation also does not guarantee an increase in the home's sale price.
- Outline the project. Mention the work to be done along with cost and materials, labor, permits, and how you will dispose of the waste.
- Get written estimates. Compare the scope of work and costs that are provided to you by each contractor along with the contracts and what is included and not included.
- Factor in potential additional costs. Learn how they will price and approve work beyond what is expected. Leave a cost allowance in the project budget for unexpected work, but do not plan on borrowing the maximum.
- Subtract confirmed other sources. This includes savings you can use while keeping an emergency reserve, along with any payments from an approved insurance claim or assistance.
Checking a contractor's license and insurance, obtaining multiple estimates, and coming to an agreement in the form of a written contract are practices recommended by the FTC to avoid home improvement scams. The FTC has also advised that contractor-arranged financing should be shopped along with other financing options.
Compare Ways to Pay for the Work
| Option | Main Consideration |
|---|---|
| Savings or staged work | Loan interest can be avoided if you pay from savings rather than borrow, including when completing the project in stages. There is a risk that delaying the funding will worsen the condition and create a safety hazard. |
| Unsecured personal loan | You do not pledge your home for an unsecured personal loan. The lender decides whether to approve you, how much to offer, and what interest and fees to charge. |
| Home equity financing | Uses your home as security. Compare closing costs, rate changes, and the risk of losing your home after default. |
| Contractor financing | Contractor financing may be provided by a lender other than the contractor. Consider the credit contract and financing conditions, along with the contract. |
These options are provided to illustrate alternatives. They are not products offered by SlickCashLoan. Consider other programs that provide aid and repair assistance, or check your insurance and warranty coverage, before acquiring more debt.
Match the Loan to the Project and Your Budget
Consider the total amount you will have to pay back and the interest you will have to pay. Determine how much you will have to pay back and how often you will have to make payments. More frequent payments do not automatically reduce interest; the amount paid, loan terms, and how payments are applied matter. Check to see what happens if you repay the loan early.
If an origination fee is withheld from the loan, account for it when checking how much is available to pay the contractor. For instance, if the project cost is $3,000, but the net loan value is $2,850, you still have to find the $150. This is an example, not an available loan offer.
An installment loan is still an obligation after a renovation is done, so keep in mind your mortgage or rent, utilities, insurance, and other obligations, as well as any other debt you may have. Do not assume a future home sale will cover the regular loan payments.
Keep the Work Agreement Separate From the Loan Agreement
Get a clear agreement with the contractors on start date, completion date, payment schedule, and delivery dates. Get a clear agreement on a response plan to delays, failure to complete work to the contracted standards, and changes to scope. Scheduling the repayment of the loan is not dependent on contractors' work schedule.
Do not depend on an estimated date of receiving a deposit to fund a cash out expenditure that cannot be reversed. Lender approval, verification, and bank processing are done once the loan request is made. When the budget is available and the loan is deposited, you are free to make project commitments.
Requesting a Personal Loan Through SlickCashLoan
SlickCashLoan is a loan request service, not a lender or contractor. Potential lenders who review a loan request for approval determine approval, the amount, repayment terms, and fees. Submitting a request does not guarantee approval.
Terms offered by lenders should be compared to the budget and other financing options. You may choose not to accept the terms offered. Anything to do with the loan is the lender's concern.
Frequently Asked Questions
Do I need equity in my home?
A personal unsecured loan does not require equity in your home. A line of credit or loan secured by your equity does. It is important to understand how a specific product is secured.
Can I use a loan for an urgent repair?
While personal loans may cover emergency repairs, the approvals and the timing of the disbursements are unknown and unpredictable. Try to negotiate with the contractor to do some work or agree on some payment arrangement in the interim while you try to arrange funding.
Should I accept financing offered by my contractor?
Take some time to shop around and see what other options are available. Find out the name of the lender, the total cost, the terms of the promotional offer, and the payment schedule. Just because you have a good contractor does not necessarily mean financing arranged by the contractor is good as well.