Loans

Best Loan Options For Your Home Improvement Project

Planning your home improvement can be exciting and overwhelming at the same time. It requires careful planning, tons of preparation and most importantly, budgeting.

For a kitchen alone, average costs for remodeling is at $20,474 with homeowners allotting anywhere from $4,500 for small renovations to as high as $49,000 for high-end styles.

But with many lending companies to choose from, financing isn’t that hard to have. Instant cash loans are now offered alongside some loan products with critical processes and requirements.

Before you look for financing option:

Before deciding on where to get your budget on home improvement, it is more important to determine first the actual money you’ll need. This means setting an appointment with your contractor and finalizing the whole project including its costs. Once you have your total project cost, add an extra budget for contingencies and possible minor upgrades. From here, you can now list options on where to get financing that suits your needs and terms.

Discussed below are six home improvement finance options to choose from:

1.  Home Equity Line of Credit (HELOC)

This is a type of loan in which the lender agrees to lend the borrower a certain maximum amount, usually based on the collateral presented. This is similar to a credit card where interest payments are usually on a monthly basis but the principal is payable when available, but usually within an agreed term of the line. HELOC is often used for major financial needs such as education and home improvements.

2.  Mortgage Refinance

Refinancing is paying off your existing loan using a new loan granted. Refinancing is common to borrowers who wanted to lengthen the loan term, reduce the interest rates, reduce the monthly amortizations, or when additional funds are needed.

The process is the same as the first time you got your home loan. When choosing to refinance, you’ll use the same collateral as your existing loan. The lender will again evaluate how many loans can be approved based on the collateral you submitted.

The difference between the newly approved loan and the existing loan will be the extra funds you can allocate for home improvement.

3.  Personal Loan

If the total cost of your home improvement doesn’t require a huge amount of money and you don’t feel like offering a collateral, then explore personal loans as an option for financing.

A personal loan is one of the fastest ways to obtain funds. The funding does not usually require specific use, so you can use it for home improvement or for purchasing new furniture.

4.  Home Equity Loan

If you are on a major home renovation, then you may be able to obtain a home equity to your advantage.  

The home equity loan is similar to home refinancing, where the difference between the approved loan less your existing loan is your equity loan.

5.  Credit Cards

Credit cards also have some advantages when it comes to financing a home improvement especially when the project includes purchasing some home fixtures. Some credit card companies offer discounts on purchases when the credit card is used. Some even have cashback features when a certain purchase limit was achieved.  

Home improvements can easily be funded by a credit card. Just swipe it.

6.  Save Up Enough Money and Pay Cash

What’s a better source of funding a home improvement aside from using your own savings? Yes, it will consume time and a lot of patience, but saving money little by little until you reached the target amount of money saves you from paying finance charges. It also helps you to stick to your budget.

Best Loan Options For Your Home Improvement Project

 

Choosing the Best Financing Option

We’ve discussed ways on how to finance your home improvement tackling almost all the most common financing options, but how do you decide which one’s the best for you?

Here are some factors you should consider when weighing your options:

How much money do you really need

The core information you need to derive with before settling for anything is the amount of money you really need. Do you need a huge money, or is it just a small home improvement project? For a small financing requirement, cash loans or credit cards are ideal. For a bigger one, personal loans can be an option. For major home improvements, refinancing or equity loan works best.

Know your credit rating

Excellent credit rating opens more doors for better financing options. Personal loans, particularly, requires a high credit standing. Since this mirrors how you deal with loans, bad scores also limit your options.

What will be your repayment period

Evaluate your repayment period based on the level of home improvement you need. You don’t need to pay a 10-year loan for a repainting job that most probably needs another repainting after 5 years. Make sure that you already completed paying the loan before another major renovation needs to be done.

Know the interest rates and costs

Select the best financing options with the most affordable finance costs. This is where you most need to compare selected lenders. Beware of a very attractive package that includes some hidden charges.

Planning a home improvement carries both excitement and thorough planning. Many factors should be considered, and financing is one of the crucial. But just like every endeavor, just take your time, relax, hire an expert to help you, and research more. Most importantly, just relax while accomplishing your dream home improvement.

How Big Banks Can Bankrupt You Overnight

In the time of the Great Depression, many mortgages were written with a provision that allowed banks to call in the loan at any time. As they began to stumble towards failure, they frantically called loans and foreclosed on properties right and left. According to Dave Ramsey, mortgage laws have changed since those days. This was to prevent such a ruinous cascade of events taking out both the lenders and the borrowers in an “every-man-for-himself” race to survive at the expense of everyone else. However, there are still some sub-categories of loans that remain subject to such provisions– albeit in a backdoor fashion.

The Back Door Callable Mortgage

Of most interest to the general public are the terms that can be included in so-called HELOCs, or Home Equity Lines of Credit. These are financial instruments wherein you pledge the remaining value of the house over and above that of your existing mortgage in return for the right to draw upon that sum whenever you like by simply writing a check.

Protecting the Banks

How Big Banks Can Bankrupt You Overnight

There are two major dangers with such a loan. First, it is based upon the value of the home minus the mortgage held against it. In the event of a housing market crash, that difference between the two can be effectively wiped out by a fall in value of the underlying asset (your home) that serves as collateral. Secondly, it is also based upon your ability to repay the note. If you lose your job, or your second-income spouse dies, you may no longer qualify for the line of credit you have already received.

But Not You

In these instances, banks have been known to freeze the line of credit without notice– meaning that you cannot access any more of the funds than you have already drawn out. Next, they may decline to roll the HELOC over once it does come due. This arbitrary power of the banks can create an immediate problem because there are some HELOCs which are written with annual renewal clauses in them. In other words, some types of HELOC’s can be called due at the option of the lender regardless of whether you have been making your payments on time. In most cases, that effectively wipes out the homeowner and leads to the loss of all their accumulated equity.

How Big Banks Can Bankrupt You Overnight

Put simply, if a bank decides that your relationship with them is more of a liability than an asset, they can mess you over very quickly. According to CNBC, 78 percent of full-time workers are living paycheck to paycheck. This means that for a vast majority of us, we’re one cash flow disruption away from financial disaster. This might be why hundreds of thousands of Chapter 13 petitions are filed every year. If you have exposed yourself to these types of risky loans, are highly leveraged, with minimal emergency savings, you could be setting yourself up for some very stressful times in your near future.

Your Best Bet is to Go With a Trusted Credit Union

Unlike big national banks, credit unions are non-profit entities who operate to maximize the value for their members. At a credit union, you are not just a customer; you’re a stakeholder. While credit unions and banks operate under similar federal regulations and provide similar services, a bank’s priority is their bottom line, not necessarily your bottom line. Not every bank is scummy, but on average a credit union is going to work with you more and treat you better.

The best method for finding financial peace is to get out of debt and stay out of debt. 2nd Mortgages, HELOC’s, Title Loans, and unsecured notes are not tools for your prosperity – they’re ticking timebombs. Don’t sabotage your financial future.  Escape debt, build wealth, and use it to make a difference in your community. You can do it!

5 Reasons To Shop Around For Car Financing

Your monthly car payment consists of both the principal on the loan, and the interest paid to a lender. While you may have little control over how much you pay for the car, you do have control over your interest rate. Let’s look a little closer at the best reasons to shop around for a car loan and how to get a better deal on your vehicle.

Look for the Best Rate

Talking to a local lender may make it easier to get the best rate on a loan. Those with bad credit may get better terms from an online lender compared to at a dealership. Coming to a dealer with a loan in hand may also offer you more leverage during negotiations.

Get Leverage Over the Dealership

You don’t have to accept the loan offer you got from a credit union or online bad credit lender. However, it does guarantee you can get the car you want, even if the dealer wants to play hardball. In most cases, you have 30 days to accept financing terms offered by an outside lender.

Know Your Budget Ahead of Time

If a credit union offers you $10,000 for a car, it should be a sign that this is what you can afford to spend on a car. In many cases, car dealers will try to sell you a car based on the affordability of the monthly payment, which rarely reflects the affordability of the car itself.

Check Your Credit Ahead of Time

Your credit score will play a major role in the loan terms that you may be offered. Applying for a loan before going to the dealership gives you an excuse to check your credit ahead of time. Doing this reduces the odds that a dealer tries to tell you that your credit is bad because you will know whether this is true or not.

The Lender May Check the Condition of the Car

A lender may ask for a vehicle history report prior to making the loan. This may help you find out if it has been involved in any car accidents or has other damage. Ultimately, this may also help you make a better decision about your next vehicle purchase.

Shopping around for a car loan can provides a variety of benefits. In addition to getting a lower interest rate, it can also help you determine how much you can afford prior to going to a dealer. This may help you get a good deal regardless of the tactics a salesperson may try to use.