6 Reasons Senior Homeowners Should Consider a Personal Home Improvement Loan

A personal home improvement loan can be a good way for seniors to finance home repair or renovation projects at a low fixed interest rate. (Shutterstock)

Aging homes need regular maintenance and upgrades to keep you safe, make your home more comfortable and preserve the value of your investment. If you don’t like the idea of ​​risking your home’s equity in your senior years, a home improvement loan may be a good option for financing your project.

Here’s how a home improvement loan works and why you might choose one to finance home renovations or repairs.

What is a renovation loan and how does it work?

A home improvement loan is a type of personal loan that you can use to pay for repair, remodeling, or renovation projects.

Home improvement loans are usually unsecured, which means that you don’t put any of your assets as collateral when you take out the loan. Instead, the amount you can borrow and the interest rate you pay are based on your credit history, debt-to-equity ratio, and other factors.

Visit Credible for view your prequalified personal loan rates from various lenders, all in one place.

Home improvement loan vs home equity loan

Home improvement loans are separate from other types of loans you can use to repair your home, such as a home equity loan, home equity line of credit, or cash refinance. With these loan options, the amount you can borrow is based on the equity in your home – the difference between the amount you owe on your mortgage and the value of the home.

  • Home equity loan — A home equity loan is secured by your property. You will typically borrow a home equity loan as a lump sum and pay it back at a fixed rate over a period of time.
  • Home Equity Line of Credit (HELOC) — A HELOC is also secured by your property, but it works more like a credit card. You can borrow from your line of credit as needed for a set period of time, called the drawdown period.
  • Refinancing by collection — With a cash-out refinance, you take out a new mortgage for more than you currently owe. Your new mortgage pays off and replaces the one you currently have, and the difference between the two amounts is yours as money that you can use for any purpose, including fixing your home.

WHAT IS A HOME EQUITY LOAN AND HOW DOES IT WORK?

6 reasons for seniors to choose a renovation loan

Depending on your financial situation, a home improvement loan can be a great choice for seniors looking to finance home repairs or home improvement projects. Here are six reasons why a home improvement loan may be the best option for you:

  1. You can preserve the equity in your home. You’ve worked hard to build up the equity in your home. But when you use a home equity loan, you’re eating into that equity, which means you’ll earn less if you have to sell the house. You will also have less equity available if you need to borrow again in the future. Home improvement loans preserve your capital when you really need it.
  2. You don’t risk losing your home. Since home improvement loans are unsecured, you won’t risk losing your home if you fail to make your payments.
  3. You can get a lower interest rate than a credit card. Credit cards have significantly higher interest rates than home improvement loans. If you’re unable to pay off your home project when your credit card balance is due, a home improvement loan can help you save money in interest payments.
  4. Your loan can be funded quickly. Most home improvement lenders allow you to apply online in minutes and get a decision almost instantly. Some types of home equity loans require an appraisal and closing costs, and can take 30 days or more to complete.
  5. Your monthly payment will not change. Most home improvement loans have fixed interest rates, so you’ll know exactly what your monthly payment will be for as long as you have the loan. This amount will not change no matter what happens to market interest rates.
  6. You will not have prepayment penalties. Most home improvement loans don’t include prepayment penalties, so you can pay off your loan as quickly as you want.

Credible, it’s easy to compare personal loan rates from various lenders, and it will not affect your credit.

Where to get a home improvement loan

To find a home improvement loan, look for a personal lender. Many personal lenders market their products specifically to pay for home improvement projects.

The following 12 credible partner lenders offer home improvement loans:

Before

  • Loan amounts: $2,000 to $35,000
  • Loan conditions : 2 to 5 years

Axos

  • Loan amounts: $10,000 to $50,000
  • Loan conditions : 3 to 6 years old

best egg

  • Loan amounts: $2,000 to $50,000
  • Loan conditions : 2 to 5 years

Discover

  • Loan amounts: $2,500 to $35,000
  • Loan conditions : 3 to 7 years old

Marcus of Goldman Sachs

  • Loan amounts: $3,500 to $40,000
  • Loan conditions : 3 to 6 years old

OneMain Financial

  • Loan amounts: $1,500 to $20,000
  • Loan conditions : 2 to 5 years

PenFed

  • Loan amounts: $600 to $50,000
  • Loan conditions : 1 to 5 years

Prosper

  • Loan amounts: $2,000 to $40,000
  • Loan conditions : 3 or 5 years

SoFi

  • Loan amounts: $5,000 to $100,000
  • Loan conditions : 2 to 7 years old

Universal Credit

  • Loan amounts: $1,000 to $50,000
  • Loan conditions : 3 to 5 years

Upgrade

  • Loan amounts: $1,000 to $50,000
  • Loan conditions : 2 to 6 years old

Reached

  • Loan amounts: $1,000 to $50,000
  • Loan conditions : 3 to 5 years

How to get a home improvement loan

If you’re ready to get a home improvement loan to pay for your project, follow these five steps to ensure you get the best deal:

  1. Check your credit. Home improvement lending decisions are based primarily on your credit report. You can request free copies of your credit reports from the three major credit bureaus using a site like AnnualCreditReport.com. Review reports carefully and make sure there are no errors, such as incorrect balances or overdue accounts that are in fact current. If you find an error, you can dispute the information with the credit bureau and have it corrected.
  2. Get prequalified for a loan. Most personal lenders allow you to be prequalified with a simple online form. This will let you know how much you are likely to be able to borrow and at what interest rate. You can apply to several different lenders to see the rates and terms that may be available to you.
  3. Select the best loan. With the loan offers in hand, select the one that suits you best. The best home improvement loans have the lowest interest rate and the lowest fees (or not).
  4. Complete a complete loan application. Once you have chosen the lender you want to borrow from, you will complete a full application. Your lender will let you know if you need to provide additional information, such as documentation of your income.
  5. Receive your money. Most personal lenders will deposit your loan funds directly into your bank account within days. Once you get the money, you can start hiring contractors and finishing your home improvement project.

If you’re ready to apply for a personal loan to make improvements to your home, Credible lets you compare personal loan rates to find the one that suits your needs.

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