A home improvement personal loan can be a good way for seniors to finance home repair or remodeling projects at a low, fixed interest rate. (Shutterstock)
Aging houses need regular maintenance and improvement — to keep you safe, to make your home more comfortable to live in, and to preserve the value of your investment. If you don’t like the idea of risking your home equity in your senior years, a home improvement loan can be a good option for financing your project.
Here’s how a home improvement loan works and why you might choose one to finance home renovations or repairs.
What’s a home improvement loan and how does it work?
A home improvement loan is a type of personal loan that you can use to pay for repair, renovation or remodeling projects.
Home improvement loans are generally unsecured, meaning you don’t pledge any of your property as collateral when you take out the loan. Instead, the amount you can borrow and the interest rate you pay are based on your credit history, debt-to-income ratio and other factors.
Visit Credible to see your prequalified personal loan rates from various lenders, all in one place.
Home improvement loan vs. home equity loan
Home improvement loans are distinct from other types of loans you may use to fix up your home, such as a home equity loan, home equity line of credit or cash-out refinance. With these loan options, the amount you can borrow is based on how much equity you have in your home – the difference between how much you owe on your mortgage and how much the home is worth.
- Home equity loan — A home equity loan is secured by your property. You’ll typically borrow a home equity loan as a lump sum and pay it back at a fixed rate over a period of time.
- Home equity line of credit (HELOC) — A HELOC is also secured by your property, but it works more like a credit card. You can borrow against your line of credit as needed during a set period of time, known as the draw period.
- Cash-out refinance — With a cash-out refinance, you take out a new mortgage for a higher amount than you currently owe. Your new mortgage pays off and replaces the one you currently have, and the difference in the two amounts come to you as cash that you can use for any purpose, including fixing up your home.
WHAT IS A HOME EQUITY LOAN AND HOW DOES IT WORK?
6 reasons for seniors to choose a home improvement loan
Depending on your financial circumstances, a home improvement loan can be an excellent choice for seniors looking to finance home repairs or remodeling projects. Here are six reasons why a home improvement loan may be the best option for you:
- You can preserve your home equity. You’ve worked hard to build up the equity in your home. But when you use a home equity loan, you eat into that equity, meaning you’ll make less if you need to sell the home. You’ll also have less equity available if you need to borrow again in the future. Home improvement loans preserve your equity for when you really need it.
- You don’t risk losing your home. Since home improvement loans are unsecured, you don’t risk losing your home to foreclosure if you fail to make your payments.
- You can get a lower interest rate than a credit card. Credit cards have significantly higher interest rates than home improvement loans. If you wouldn’t be able to pay off your home project by the time your credit card balance is due, a home improvement loan can help you save money in interest payments.
- Your loan can be funded quickly. Most home improvement lenders allow you to apply online in just a few minutes and get a decision nearly instantaneously. Some types of home equity loans require an appraisal and closing costs, and can take 30 days or more to close.
- Your monthly payment won’t change. Most home improvement loans have fixed interest rates, so you’ll know exactly what your monthly payment will be for as long as you have the loan. This amount won’t change, no matter what happens to interest rates in the market.
- You won’t have prepayment penalties. Most home improvement loans don’t include prepayment penalties, so you can pay off your loan as quickly as you’d like.
Credible makes it easy to compare personal loan rates from various lenders, and it won’t affect your credit.
Where to get a home improvement loan
To find a home improvement loan, look for a personal loan lender. Many personal loan lenders market their products specifically for paying for home improvement projects.
The following 12 Credible partner lenders offer home improvement loans:
Avant
- Loan amounts: $2,000 to $35,000
- Loan terms: 2 to 5 years
Axos
- Loan amounts: $10,000 to $50,000
- Loan terms: 3 to 6 years
Best Egg
- Loan amounts: $2,000 to $50,000
- Loan terms: 2 to 5 years
Discover
- Loan amounts: $2,500 to $35,000
- Loan terms: 3 to 7 years
Marcus by Goldman Sachs
- Loan amounts: $3,500 to $40,000
- Loan terms: 3 to 6 years
OneMain Financial
- Loan amounts: $1,500 to $20,000
- Loan terms: 2 to 5 years
PenFed
- Loan amounts: $600 to $50,000
- Loan terms: 1 to 5 years
Prosper
- Loan amounts: $2,000 to $40,000
- Loan terms: 3 or 5 years
SoFi
- Loan amounts: $5,000 to $100,000
- Loan terms: 2 to 7 years
Universal Credit
- Loan amounts: $1,000 to $50,000
- Loan terms: 3 to 5 years
Upgrade
- Loan amounts: $1,000 to $50,000
- Loan terms: 2 to 6 years
Upstart
- Loan amounts: $1,000 to $50,000
- Loan terms: 3 to 5 years
How to get a home improvement loan
If you’re ready to get a home improvement loan to pay for your project, follow these five steps to help make sure you get the best deal:
- Check your credit. Home improvement loan decisions are based primarily on your credit history. You can request free copies of your credit reports from the three major credit bureaus using a site like AnnualCreditReport.com. Look carefully through the reports and make sure there are no errors, like incorrect balances or accounts listed as past due that are actually current. If you do find a mistake, you can dispute the information with the credit bureau and have it corrected.
- Get prequalified for a loan. Most personal loan lenders allow you to get prequalified with a simple online form. This will let you know how much you’re likely to be able to borrow, and at what interest rate. You can apply with several different lenders to see the rates and terms you may be offered.
- Select the best loan. With loan offers in hand, select the one that works best for you. The best home improvement loans have the lowest interest rate and lowest (or no) fees.
- Fill out a full loan application. Once you’ve picked the lender you’d like to borrow from, you’ll complete a full application. Your lender will let you know if you need to provide any additional information, such as documentation of your income.
- Receive your money. Most personal loan lenders will deposit your loan funds directly into your bank account within a few days. Once you get the money, you can start hiring contractors and completing your home improvement project.
If you’re ready to apply for a personal loan to make home improvements, Credible lets you quickly and easily compare personal loan rates to find one that suits your needs.
