Home Improvement Loan VS Home Equity Line
Of Credit (HELOC). Thinking about starting a home improvement
project? Most people don’t have money saved up to
do home improvements, sound familiar? Borrowing money is a great option if you do
your homework. Let’s take a deep dive at understanding
two of the most popular ways. Home Improvement Loan VS Home Equity Line
Of Credit (HELOC). Home Improvement Loans:
Let’s go over the fastest and easiest option first.
Home Improvement Loans are extremely popular and for good reason.
Let’s face it, home makeover projects are expensive, many homeowners can’t pay cash
or do not have equity built up in their homes. Many folks like yourself finance home improvement
projects with an unsecured loan instead of using their credit cards.
Home improvement loans don’t require your home as collateral which is a huge advantage.
These loans are backed by your personal income and credit history and are extremely easy
to get even with below-average credit scores. How fast can you get money?
Home improvement loans are the fastest way to get money.
The approval process is easy, a simple 5 minute online application will get things started
immediately. Depending on how much money you need and how
quickly you respond to the lender, you can have money in your bank account as fast as
tomorrow. Are the interest rates competitive?
This financing option has competitive fixed interest rates, so there won’t be any increases
in your interest rate down the line. The payback agreements are generally shorter-term
loans, 1 to 6 years, so the amount of interest you pay for the borrowed money is extraordinarily
less. Flexibility is also a major win for this personal
loan option. Once the money is in your hands you have the
power to do whatever you want with it. If your project comes in under budget, or
your plans change of how you want to allocate the money, you can use the funds however you
want. It is important to educate yourself about
Home Improvement Loans. Borrowing money is something that can put
a big strain on your monthly budget and even cause unnecessary financial stress in your
life. Home Equity Line Of Credit (HELOC):
The HELOC loan is a secured form of credit. The lender, often times a bank or credit union,
uses your home as a collateral guarantee that you’ll pay back the money you borrow.
If this is something that you can live with, this might be a great option for you.
It’s a revolving line of credit, similar to how a credit card functions.
If you plan ahead and have plenty of equity built up in your home to weather a downturn
in the housing market, a HELOC is a great way to finance your home improvement project.
How fast can you get money? The process is similar to applying for a mortgage.
Typically the lender will evaluate your creditworthiness which can be done filling out a form online.
When that is approved, there are terms and conditions to read and sign.
From there, a third-party appraisal is scheduled to ensure that there is enough equity available.
The whole process can take 30-60 days, which in the whole grand scheme of things is not
too bad. Are the interest rates competitive?
One of the biggest advantages of a HELOC is the interest rate.
Since you are putting your home up as collateral, financial institutions view this as a lower
risk loan. The interest rates are generally variable,
so it is important to know that it is very likely to get more expensive the longer you
owe the money. Most HELOCs have a 25-year term, with a draw
period and a repayment period. The draw is typically 5 to 10 years, followed
by a repayment period of 10 to 20 years. If you are responsible with your money and
have the willpower to make a repayment plan and stick to it, then there should not be
any issues. Often times lenders will offer interest-only
payments, sometimes called “repayment freedom”, which will allow you to make much smaller
monthly payments. This so-called freedom obviously comes with
the inherent risk of owing more on your mortgage than what your home is worth if you need to
sell your home unexpectedly. Flexibility is probably the number one reason
people choose the HELOC option. Much like a credit card, there is a line of
credit that you can borrow from any time. There are no requirements or documentation
on what the money is used for. If you go over your budget or need emergency
money, it’s as easy as logging into your bank accounts and transferring money.
It is important to educate yourself about HELOCS as it relates to the risk of losing
your home. Understanding these risks ahead of time will
reduce the likelihood of any catastrophic scenarios.
So now what? Which loan is better for you?
Now that you have compared Home Improvement Loan VS Home Equity Line Of Credit, there
are important benefits and risks to consider. For borrowers who have equity in their home
and are confident they can make the loan payments, a home equity line of credit offers competitive
interest rates and often times less out of pocket money each month.
However, if you do not want to be putting your home up as collateral and just need a
quick and simple way to get money, a Home Improvement Loan may be a better option.
Want to get started right now? Simply fill out the form that takes just a
few minutes on LenderCart.com. Get your project started today!