If you believe you're ready to manage a significant home renovation project, your primary concern should be how to pay for it. Whether you need to replace your roof or restore your entire home, a home renovation loan can help you get the funds you need.
Securing a home repair loan when you hold less than perfect credit might be pretty tricky. However, it doesn't mean that you're entirely out of luck, as home improvement loans for bad credit may offer quick relief. Here's everything you need to know about credit home improvement loans and some handy alternatives you may be worth examining.
Home Improvement Loans with Bad Credit Explained
If you don't want to opt for a home equity loan or max out your credit card, a bad credit loan for home repair may be the best option available out there. However, if you have a bad or even no credit score, you need to be prepared for a heftier price tag. The credit score is the key consideration factor for your lender when determining whether to qualify you for a loan or what interest rates to offer.
Aside from interest rates, examine other features of bad credit home renovation loans to determine whether they are the best approach to fund your project.
Quick Financing: Lenders can frequently finance a loan in less than a couple of days; even some claim to provide cash on the same day of a credit request.
Fixed Payments: Unlike a credit card or line of credit, the money from a bad credit loan is issued in a lump sum, so you won't be tempted to spend more than the budgeted amount.
Short Repayment Terms: Improvement loans for bad credit have shorter payback durations than home equity loans, thus resulting in larger monthly payments.
Unsecured Nature: Most bad credit loans are unsecured, which means you don't have to put up any security. Property equity finance, on the other hand, is backed by the value of your home.
Common Alternatives to Home Improvement Loans for Bad Credit
Home Equity Loan: Indeed, a home equity loan is a form of second mortgage that you can secure on your property to finance home-related costs such as home renovation projects. The amount you may borrow is mainly dependent on the market value of your property. However, since your property is used as collateral, your credit score isn't as important as it would be for a personal installment loan. This makes it an excellent alternative for poor credit home repair loans. However, you need to consider one notable disadvantage; if you default on a collateralized debt, the lender is lawful to seize your property to compensate for damages.
Home Equity Line of Credit: The home equity line of credit, also referred to as HELOC, is quite similar to a home equity loan, enabling you to take out quick funding for home renovation using your primary collateral. However, rather than providing a single monthly installment, the HELOC functions as a revolving type of loan, much like a credit card. This is especially useful when you have continuous upgrades and don't know when you will need extra money.
Government Loans: Another alternative to bad credit home improvement loans is a title loan offered by The Department of Housing and Urban Development. These are government-issued funding options requiring that the property you restore be your primary residence, plus you are not allowed to sell it for a long time, usually more than ten years. If you intend to make energy-saving improvements, you may qualify for an energy-efficient mortgage again issued by the government.