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Home improvement loans can be used for anything related to the home. You can add rooms to your house, paint it, cover it, completely remodel it, furnish it, reform it… the sky is the limit. As a financial advisor, I have received many inquiries about loans designed to help you improve your home. They are somewhat new to the market and have therefore become the new favorites. People don’t always know that they can apply for an unsecured form of this type of loan. In this way, the risk of foreclosure disappears instantly. Tranquility is everything.
In this article we will draw attention to the general facts regarding this subtype of loan, as well as the advantages and disadvantages. Hope you enjoy!
General information
An unsecured loan is one that does not need collateral pledged against it. What this means is that if you apply for an unsecured home improvement loan, the lender will not have the security that collateral provides. Loan amounts range from $500 to $25,000. And the repayment period can range from 6 months to 10 years.
Requirements for approval
As with any unsecured loan, the lender is taking on big risks. This means that many financial institutions or banks can be picky when it comes to qualifying and approving a loan. They will often require high credit scores and a good financial background. This does not mean that people with bad credit will not be able to get an improvement loan, but it does mean that they will have a more difficult time finding a lender to finance their project.
Advantages of the improvement loan
There are many advantages associated with this type of loan. The most obvious is the fact that there is very little risk to the borrower in applying for a loan like this. Why is this? Because the property is not used as collateral, if the borrower defaults on the loan, the lender will not be able to repossess the home (called foreclosure). The idea of not jeopardizing the future of your home and family is very reassuring for the borrower.
Improvement Loan Disadvantages
Unlike secured loans, unsecured loans (regardless of the type) tend to have higher interest rates. This is meant to balance out the risk the lender takes when they lend money with no security of getting it back, they usually have to take out insurance policies to protect themselves. Another drawback associated with this type of loan is that the amounts offered are lower than those offered for a secured loan. Also, if the borrower has a bad credit score, the amounts of money available to them will sink even further. In addition, the duration of the loan will also be shorter than in a guaranteed one. Many borrowers ignore higher interest rates and higher monthly payments for the peace of mind that they can’t lose their homes if they don’t pay.
Whether you’re going for a secured or unsecured home improvement loan, the easiest way to find them is online. Browse the web, compare payment plans and terms, and request free loan quotes whenever possible. Your home improvement loan is getting closer!