Upgrading Your Home: How Unsecured Home Improvement Loans Can Help

Written by Posted On Friday, 25 January 2019 08:35

Say you just bought a home with potential -- but it needs a little work. Or maybe you’ve been in your home for years, but don’t have enough equity or collateral to borrow what you need for upgrades or repairs. These or other circumstances might mean that a cash-out refinance, home equity loan, or other options won’t meet your needs. If this is the case, it might be time to consider an unsecured home improvement loan.

What Is an Unsecured Home Improvement Loan?

An unsecured home improvement loan is similar in structure to an unsecured personal loan. Your income, credit score, debt to income ratio, and other factors might qualify you to borrow a certain amount. However, you don’t need to put up collateral or put a lien against your home equity against repayment. Instead, the financial institution relies on your promise as a borrower that you will repay the loan.

Should I Consider Unsecured Home Improvement Loan?

Not every homeowner will qualify for or choose to use home equity or other financing options. There are a number of reasons why you might decide to go with an unsecured home improvement loan instead, including:

 

  • You have good to excellent credit.

  • You have little equity in your home.

  • You want a shorter repayment period.

  • You want to hang onto the home equity you have to finance future home improvements, or plan to sell your home sooner than later.

  • You want or need home upgrades, but don’t want the loan to be tied to your home or other property with a lien.

  • You need to get started on your home improvements or repairs soon, rather than waiting for a secured loan, such as a home equity line of credit, to come through.

Things to Keep in Mind

If you’re considering an unsecured home improvement loan, there are several things you’ll want to be aware of.

 

  • You will need a high credit score. Lenders are approving or denying your loan based on your credit history, rather than backing up their risk with a lien against your property.

  • Unsecured home improvement loans usually carry a higher rate than home equity or other secured loans.

  • The timeframe for repayment is also shorter, usually between 1 and 5 years.

  • Due to interest rates and repayment terms, unsecured home improvement loans usually come with higher monthly payments than home equity loans or mortgages. Make sure your budget is flexible enough to make the payments.

  • Lenders will need to verify your income and debt-to-income ratio to make sure you are a good risk.

  • Depending on your financial situation, you may not be able to borrow as much as you would with a home equity or other secured loan.

Using Your Unsecured Home Improvement Loan

You can use the funds from your unsecured home improvement loan for whatever improvements you like. Do you need a new kitchen? An extra bedroom or bathroom? Maybe you’ve always wanted a large deck or a pool. Or, maybe it’s something a little less fun like a new driveway or HVAC system. Whatever the reason, be prepared to tell your lender what the money will be used for when you apply.

 

One of the great things about an unsecured home improvement loan is convenience. Secured financing, like a home equity loan, can take weeks or longer to come through. However, getting an unsecured loan based on your credit, income, and debt level could be as quick and easy as getting a credit card.

 

Financing doesn’t have to stand in the way of creating your dream home or making repairs. If you feel an unsecured home improvement loan could be the right solution for you, do some homework on lenders and terms, and get your home improvements underway much sooner.

 

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James Stevenson

Hi, My name is James and I've been involved in the property and real estate industry for 10 years now. I hope people will like to read about my thoughts and experiences in the industry and please contact me if you want to discuss my articles further!

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