Whether you’re doing an emergency repair such as replacing your roof or a busted pipe, or a home improvement project such as remodeling your back yard or outdated kitchen, there are many circumstances that require a bit more money than you might have cash for.
Although conventional wisdom points to getting a home equity loan, HELOC, or home improvement loan, there is a smarter choice.
Many savvy homeowners opt to take out a personal loan to help them finance their housing repairs or remodels and you can too.
Why choose a personal loan?
Although there are other types of loans that are said to be specifically created for home improvement and repairs with typically lower interest rates, personal loans are still a better choice for most homeowners.
Let’s go through the top five reasons why you should take out a personal loan to finance your next home repair or remodel.
- They are lower risk than home equity.
Because personal loans are typically unsecured, you have less to lose should you not be able to pay on time. On the other hand, home equity loans and HELOCs are secured by using your home as collateral. That means that those loan holders could force you to foreclose your home for refinancing to pay back your loan if you can’t.
- They are more stable.
Home equity loans and HELOCs usually have unfixed interest rates, meaning that over the course of paying your loan back, your interest rate will rise with the shifts in the housing market. Even if you start out with a really low interest rate on your home equity loan, you may end up paying up to twice the amount of the original loan in interest fees as your rates are increased!
Personal loans have an interest rate that, while usually higher than the upfront home equity loan rate, is fixed so you can rest assured that you won’t be paying more in interest than you planned!
- They are more easily acquired.
The process of qualifying for either a home equity loan or a HELOC is notoriously long and complex, filled with paperwork. Especially if your home repair needs to be fixed immediately, you’ll almost have better luck with a personal loan.
Personal loans have a much easier and faster process, assuming you have a good credit score. (Although there are ways to get a personal loan even f you have a bad credit score.) ß link to “6 REASONS WHY GETTING A PERSONAL LOAN MIGHT BE A SMART CHOICE FOR YOU!”?
- They cost less in fees.
While personal loans may have origination fees, they do not have the host of fees that home equity loans or HELOCs do, including an early repayment fee.
- They can be taken out for smaller amounts.
If you just need to fix that sagging roof or leaking water pipe, it may make sense to take out a loan for a smaller amount as soon as possible. Emergency repairs wait for no one and you may end up causing further damage to your home if you wait to repair!
If you want to make a smart decision when financing your home repair, schedule your free consultation with one of our loan specialists at CLN Finance today!