Different Home Improvement Loan Options

If you want to remodel your home, then you will likely need a loan to do so. There are a variety of loan options available. You will need to compare and contrast the different options so that you can choose the one that is best for you.

Home Equity Loan

If you have built up equity, then you can use it as collateral to finance a loan. One of the many great things about home equity loans is that they have low interest rates. You will also have 5 to 10 years to repay the loan. You should have at least a 680 credit score to apply for a home equity loan.

Home Equity Line of Credit

A home equity line of credit works a lot like a credit card. You will be able to withdraw amounts until you reach the maximum. Your limit is based on your equity. The interest rate on a home equity line of credit is usually variable. This means that you can start off with a low interest rate and end up paying a much higher interest rate.

401K

If you have a 401K, then you can withdraw from it and use it to pay for your home improvement project. The fees for this are typically low. You also do not have to worry about meeting any qualifications. However, if you leave your job, then you will have to pay the full balance and penalties.

Title 1 Loan

You will get a title 1 loan from a bank. However, it is backed by the government. You do not need to have any equity on your home in order to get approved. There are restrictions on what you can use a Title 1 loan for. You will not be able to use it for non-essential items such as a swimming pool. The maximum amount that you can get is $25,000. Title 1 loans are long-term loans. In fact, you can get up to 25 years to pay off the Title 1 loan.

Credit Cards

If you have great credit, then you can use a credit card to pay for your home improvement project. You may be able to get a credit card with a 0 percent interest rate. You may not have to pay any interest for 12 to 18 months.

Cash-Out Refinancing

You can refinance your mortgage for a higher amount. The difference can be used to pay for your home improvement project. Your home equity, loan amount and lender will determine the interest rate. The interest rate that you pay will likely be tax deductible.

Personal Loan

A personal loan can be used to cover your home improvement expenses. You will typically be able to borrow anywhere from $1,000 to $4,000. These loans will typically have to be repaid back within 2 to 5 years. The interest rates on personal loans can vary. However, if you have good credit, then you will likely be able to get a loan with a better interest rate.

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