What is a home improvement loan?
A home improvement loan is an unsecured personal loan that you use to cover the costs of home upgrades or repairs. Lenders provide these loans for up to $100,000. A home improvement loan comes in a lump sum and you repay it in monthly installments, usually over two to 12 years.
How do home improvement loans work?
Unlike home equity financing, home improvement loans do not require collateral. Whether you qualify and the loan’s interest rate are based on information like your credit and income. Once approved, you may receive your loan within one to two days. Missed or late loan payments will negatively impact your credit, but you won’t risk losing your home.
Home improvement loans vs. equity financing
A home improvement loan makes sense if you don’t have enough equity in your home or don’t want to use it as collateral. Equity is your home’s value minus what you owe.
If you have equity, you could get a lower monthly payment with a home equity loan or line of credit. This type of financing typically requires a home appraisal, which means a longer funding time.
Home equity loan
Home equity loans come in lump sums and have fixed interest rates, so monthly payments never change. You repay this loan in monthly installments over a term as long as 30 years.
Compare to personal loans: Home equity loans work similarly to personal loans, but they often have lower rates and longer repayment terms.
Home equity line of credit
A HELOC is an open credit line…
