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How to Apply & Qualify for a Home Improvement Loan

 

Your home requires both short term and long term maintenance to increase its life span and maintain its market value. Failure to apply a proper maintenance schedule on your home may result in the physical deterioration of its elements as well as depreciation of its market value. This is not what a homeowner expects or desires. One thing that makes homeowners reluctant to apply a long term maintenance plan on their property are the costs of home improvement or long term maintenance. When you delay maintenance on your property, damage due to wear, tear, staining, cracks and breakage will escalate, reaching a state where your property is beyond repair. The cost of refurbishments will increase and you might be forced to demolish the whole building.

If you don’t have funds to repair or renovate your home, one possible option is applying for a home improvement loan at a bank or lending company. Before you apply for a loan, there are things that you have to know, decide on and put in order if you want to increase your chances for loan approval.

Do You Have a Positive Credit Record?

All banks and lending companies will look at your credit history and rating before they make a decision. If your borrowing history is tainted with payment defaults, late payments, overdrafts and bankruptcy, you will find it hard to be approved for a loan. However, hope is not lost. There are many ways of cleaning up your credit history. These include debt refinancing, debt consolidation and making an effort to pay when you are in a good financial state. Once your debts are cleared, you can apply for a home loan with confidence.

Do You Have a Cost Estimate or Renovations Quote?

It’s not wise to apply for a loan when you don’t know the cost and scope of the renovations. Find a Quantity Surveyor or Construction Estimator to measure the works and prepare an estimate. If you can’t get hold of a Quantity Surveyor, get a quote from a contractor. They will come to your house to get site measurements and pictures. They will then prepare quote based on the scope of the works.

Secured or Unsecured Loan

Home improvement loans are either secured or unsecured. You have to decide which of the two is good for your circumstances. A secured loan requires collateral or guarantee of security. This collateral is usually in the form of a residential property. You must be the owner of this property or home. The lending company will ask you to provide a valuation of your home. This involves a lot of paperwork so make sure that your valuation is certified by a property valuer to make the process smooth and legit. The advantage of a secured loan is that you will access to a high loan amount that is often enough for large-scale renovations. However, the disadvantage is that you need to secure the loan against your house or property, so you can’t apply for this loan if you don’t own a home. The most common type of secured loan for home repairs and improvements is a HELOC (Home Equity Line of Credit). A HELOC allows you to draw sums of money when you need them. It includes a revolving line of credit that is available when you need it. The borrowing ceiling is very high and you can use this line of credit for renovation projects with large amounts of provisional items (i.e. unknown items and contingencies). There is a variation of this loan which is simply known as a HEL (Home Equity Loan). A HEL does not have a revolving line of credit but it’s a one-time lump sum payment that is deposited in your bank account. The advantage of a Home Equity Loan (HELOC or HEL) is that you can lock in an interest rate (APR) in advance, or you can just use the default variable rate that will change with time and market conditions. With a HELOC, you are given an initial timeframe to draw funds for your project (e.g. 5 years), and thereafter a period for repayment.

For those who don’t own homes or real estate, your option is an unsecured loan. This is the easiest loan to get if you have an acceptable credit score, permanent employment and monthly income. To qualify for this loan, you are required to submit your documents (proof of income, credit history etc.) to a bank or lending company. The loan is usually processed quickly within 24 to 48 hours, and the loan may be deposited in your bank account on the same day. As with any loan, your interest rates depend on the loan amount, period and credit score.

Where to Apply for Home Improvement Loans

There are various institutions that provide home loans. These include banks, lending companies and financial services. Here are some of the companies that you can try:

Prosper – Loans from $2000 to $35,000

BECU – Home equity loans up to $500,000, Unsecured loans up to $25,000

LendingClub – Unsecured loans up to $40,000

KeyBank – Unsecured loans from $5,000 and above

LightStream (SunTrust Bank) – Unsecured loans up to $100,000, minimum amount – $5,000

WoodForest National Bank – Unsecured loans up to $10,000 and above

Wells Fargo Bank

  • HELOC minimum borrowing amount – $25,000
  • Unsecured loan $500 minimum for credit card financing
  • Unsecured Personal Loan – $3,000 minimum amount
  • Unsecured Personal Line of Credit (PLOC) – $3,000 to $100,000

SunTrust Bank – Unsecured loan $5,000 to $100,000

Barclays Bank – Unsecured loan 1,616.40 to 59,498.40 GBP

NatWest – Unsecured loan 1,000 to 50,000 GBP

Discover – Loans from $35,000 to $150,000

10 Lending Companies & Banks to Get Home Improvement Loans – Building Finance

10 Lending Companies / Banks to Get Home Improvement Loans – Building Finance

If you have plans to renovate your house or make changes to the interior design, one of the things that may hinder your plans is lack of financing. Unless you have surplus savings that are not attached to your household savings account, you will be required to look elsewhere to find funding.

Before you apply for a remodelling loan, you have to estimate the cost of the required renovations. Consult a construction cost estimator or home designer to take site measurements and photos of places that need to be upgraded, altered or improved. For example, if you only want to make changes to the living room, you will need to take room measurements – the length, width and height.

The home designer should prepare sketch plans, and together with the site information and photos, the estimator can prepare a cost estimate or renovations bills of quantities. The homeowner should then use the cost estimate to apply for a loan, hence before you visit a bank or financial institution, you must have the project costs with you.

Home improvement loans are one option that you can use to finance your project. The following are 10 financial institutions to apply for a home renovations loan:

Prosper

Prosper is a loan company based in the USA. It operates in most states except West Virginia, Iowa, North Dakota and Maine. The company has 10 types of loans available for clients, and one of these is for people looking to renovate or remodel their dwelling. You can secure a loan for home repairs, kitchen and bathroom remodelling as well as furniture upgrading. External works such as decks and gardens are also covered by the loan.

To apply for a loan, just visit the website, and fill an online form. On the form, you are required to enter the value of the renovation cost, select home improvement from the drop-down list and put your credit score. There are 4 credit scores – poor, fair, good and excellent. If your credit score is fair and above, your chances of approval will be high. Submit the form to get a quote. Prosper offers loans from $2000 to $35,000.

With Prosper, the annual rate charged for borrowing (APR) depends on the loan period, the applicant’s credit rating and amount of loan. To keep the APR low, you have to maintain a good Prosper credit rating.

Apply for Loan

 

BECU

BECU is a financial organization that offers banking, loans, mortgages and investment products. If you are looking for home refurbishment loans, the company offers two types of loans in this category. The first type of loan that you can opt for is the Home Equity Line of Credit (HELOC). This loan is obtained by attaching your home or house as collateral. Home Equity is the value of your home minus liabilities. The BECU HELOC is an open-end loan, meaning that you are allowed to withdraw any amount of money up to a certain limit according to your needs. This type of loan is useful for an ongoing project that requires maintenance, for example repairing or renovating a home. Facility management requires both a short term and long term maintenance plan during the life cycle of a building to ensure its longevity, and to maintain its market value. With a HELOC, you will have access to funds when you need to do some improvements on your property. BECU offers a HELOC up to $500,000, the default interest rate is variable, but you can choose a fixed rate that will prevail from now and the future. An applicant who has been approved for this loan will only start paying back the owed amount after the draw period has lapsed.

The second type of loan that you can choose at BECU is the Home Improvement Loan. Unlike the HELOC, this loan is provided as a lump sum at a fixed rate. The advantage of this loan is that you are not required to provide collateral or security. You simply apply for the loan, and depending on your credit score, salary scale and other factors, you will be eligible to borrow up to $25,000. This loan is suitable for repairs and maintenance work.

Apply for Loan

 

LendingClub

LendingClub is a US-based financial company dealing in loans and investment accounts. You can obtain a personal loan for financing your home improvement and repairs. The type of loan that you can get at this institution is a collateral-free loan that doesn’t require any form of asset security. All you need to do is submit an application online, stating the amount of required loan. The next step is choosing the best repayment options and rates, and if you are eligible, LendingClub will approve your application and send money to your bank account. People have used this loan for remodelling projects, fixing home items, repairing building elements and adding new structures such as outdoor decks.

So how much can you borrow from LC? The maximum that you can borrow is a lump sum of $40,000. This is usually enough for home renovations that do not include complete demolitions or complete rebuilding. LC does not charge a fee for settling your debt too early. You might be surprised, but a lot of American lending companies will penalize you for paying back a loan too early, since they are looking to make a profit from you. The minimum repayment term for LC loans is 36 months, and like most loans the APR depends on your credit rating, history, amount borrowed and the repayment period.

Apply for Loan

 

KeyBank

KeyBank is a bank-based financial service providing Americans with banking accounts, loans, credit cards, investment and insurance products. The home remodelling loan offered by KeyBank is unsecured, meaning that you can borrow money without the hassles of home equity requirements. Going through the process of attaching and valuing your house for loan application purposes is a lengthy procedure that requires a lot of paperwork. You can avoid this by opting for a KeyBank non-collateral loan. The company promises to apply low interest rates on your loan, which can be repaid in flexible terms with durations of up to 60 months.

To be eligible for a KeyBank loan, you must be at least 18 years of age, be an American resident and live in a supported state. At the moment, the bank only processes applicants from 15 states. The company’s loan ceiling seems to be unlimited, but you can start borrowing from $5,000. They serve individuals, businesses and corporate employees. KeyBank has over 1,200 branches in the USA and owns more than $134 billion in assets.

Apply for Loan

 

LightStream

LightStream is a division of SunTrust bank. They offer home improvement loans with APR starting from 3.99%. The lending company has a wide range of loan and refinancing products, from boat to wedding loans, you will find what you are looking for. The home renovation loans will cover a variety of projects such as additions, kitchen remodelling, bath redesign, house extensions, landscaping, roof replacements, solar energy and swimming pool installations.

LightStream loans are unsecured, you don’t need home equity and there are no fees. Within a few steps of submitting your application, your loan will be processed as quickly as possible if you meet the requirements, and you might see money in your bank account on day 1 or 2. The interest rate is fixed, there is no limit on the types of renovations you can do, and you can claim as much as $100,000, one of the highest non-collateral loan you can ever get in the USA. The qualifying amount is $5,000.

To get started with your project, fill in the application form on the company’s website. Select “Home Improvement/Pool/Solar Loan”, enter your desired loan amount, the preferred duration and method of payment. You can either pay with an invoice or autopay facility. The interest rates are displayed on the site including the loan amount, and payment periods. LightStream operates during the week, from Monday to Friday between 9am and 8pm, and on Saturdays from 12:00 to 7pm. Applications are processed on a daily basis so you will get never get a delay.

Apply for Loan

 

WoodForest National Bank

WoodForest National Bank is a US bank that offers personal and small business banking products such as checking accounts, savings accounts, credit cards, investment and insurance services. The bank is engaged in a lot of community development projects such as affordable housing so you are bound to find products aligned to residential renovations. There are two types of home improvement financing that you can find at WoodForest. You can opt for a Home Equity Line of Credit or you can get an unsecured loan.

The unsecured loan allows you to finance home refurbishments such as kitchen cupboard replacements, re-painting walls, tile replacement, door and window repairs. The APR for unsecured loans starts from 5.99%. Depending on the cost range of your project, you can apply for loans up to $10,000 or more. Loans below $10,000 are processed quickly. To hasten the processing of your loan, you have to submit your documents online. The bank will then activate and send an automatic deposit into your account.

At the moment, WoodForest has branches and services in 17 states. Applicants should note that although the home improvement loan provided by this bank is an unsecured loan, you must own a residential property or dwelling in order to qualify for this loan. However, your property is not attached to the loan since it’s not a Home Equity Line of Credit.

Apply for Loan

 

Wells Fargo

Wells Fargo is one of the most popular and oldest banks in the USA. The bank provides clients with personal, small business and commercial products such as loans, credit cards, mortgage, insurance, investment and retirement plans. By joining and using the bank, you will also be rewarded with points that can be converted into cash. At Wells Fargo, home improvement loans are found at their lending center under home mortgage loans.

Before you complete an application for project financing, you have to think about the amount you want to borrow, the estimated duration of your project, a suitable repayment plan for your budget or financial status and the time you would need to finish payments. Depending on your project, you might need a revolving line of credit that allows you to withdraw money whenever you need or a lump sum payment that is deposited in your account at once. Decide whether you are going to hire a contractor or if it’s going to be a DIY project.

Wells Fargo bank provides you with two main options – a secured or unsecured loan. Secured loans are attached to your mortgage and home equity. The cash-out refinance option allows you to settle your mortgage balance, and at the same time you will get funds for financing your personal projects. However, the lump sum payment is variable and  it depends on many things. If you want ongoing access to funds, the Home Equity Line of Credit will be suitable for this purpose. The HELOC allows you to borrow at least $25,000, you can lock in a fixed rate or switch between a fixed and variable rate. The interest on this loan may be tax deductible.

If you are not interested in secured loans, there are 3 types of unsecured loans that Wells Fargo has to offer. You can choose between credit card financing, personal loans and PLOC (Personal Line of Credit). A credit card allows to draw at least $500 on an ongoing basis, and you will also be eligible to participate in a rewards program that allows you to earn credits towards your home improvement project. The Personal Loan option qualifies you for a minimum lump sum payment of $3,000. Your application is processed quickly and funds will be available within 24 hours. The APR is fixed, as well as the payment period and loan instalments. The third option for an unsecured loan is applying for a PLOC. It offers loans between $3,000 and $100,000 on an ongoing draw basis. Funds are available within 24 hours if you are approved, and there are no fees for transfers and cash advance.

Apply for Loan

 

SunTrust

SunTrust bank is a big American banking company that provides a range of financial products including most types of loans for home improvement, home purchasing, auto financing, student education, recreation and debt consolidation.

Their home remodelling and refurbishment loan can be obtained at a minimum fixed rate of 3.99% depending on your credit history and loan requirements. The main features of this loan are that it is a non-collateral, equity-free loan which can be secured instantly and deposited into your bank account.

The LightStream home improvement facility allows you to apply for loan amounts between $5,000 and $100,000 at a fixed rate. The payment period is 24 to 84 months, there are no fees for processing the cash advance and LightStream has placed a guarantee that if you are not satisfied with their service, they will pay you $100.

Apply for Loan

 

 

Barclays Bank

With over 300 years of service, Barclays bank is one of the oldest and most popular UK banks with an international presence in over 50 countries including the USA, Europe, Africa and Asia. The financial institution provides savings and investment accounts, including insurance, mortgage and wealth creation services. Personal, business and corporate clients are registered with the bank to enjoy the company’s borrowing facility.

At Barclays bank, you can apply for a home improvement loan under a personal account. You can borrow up to GBP 59,498.40 and a minimum of GBP 1,616.40. The APR ranges from 4.9% to 22.9% depending on your loan amount, repayment period and credit profile.  A 4.9% APR applies to borrowing amounts between 7,500 GBP and 15,000 GDP with a loan period of 2 to 5 years, however your personal circumstances will determine the applicable rate.

Barclays bank can give you a quote based on the builder’s price or estimate. You will be required to pay an early settlement fee for a home renovation loan. Provided that you have submitted all the required documents, your loan will be processed quickly and deposited into your account if you meet the qualification criteria.

Other benefits of taking a Barclays Loan are that you can start making settlements as early as possible, but you will incur charges plus any interest charges related to your payment. Barclays are so confident in their loan products such that they will give a price guarantee if you find a competitor with a lower APR on a similar product. To hook you in, they will adjust their APR to match the competitor’s interest rate.

Whether you are planning to renovate your home or increase the market value of your dwelling, Barclays offers some special advice on their online blog. You can contact a Barclays representative between 8am and 9pm from Monday to Sunday.

Apply for Loan

 

NatWest

NatWest is a UK bank specializing in personal, private and business banking. They provide loans for home upgrading, car purchasing, holidays, debt consolidation and weddings. Their home improvement plan has one of the lowest rates – 3.4% APR, which is applied on loans ranging from 7,500 GBP to 19,950 GDP.

The minimum and maximum borrowed amounts are 1,000 GBP and 50,000 GBP respectively. The borrower has up to 10 years to repay if they have a loan exceeding 7,500 GBP. The purpose of the loan is to finance home repairs, alterations, additions and renewals. According to research, the kitchen and bathroom are two main areas that a new homeowner wants replaced, followed by addition of a garage or parking space if it’s not available.

To determine the amount of money that you would need to borrow, use the online calculator. The minimum and maximum repayment terms are 12 and 96 months respectively.

Apply for Loan

Discover

Discover is a lending and banking company offering a variety of financial products such as personal loans, student loans, credit cards, mortgage refinancing, debt consolidation and home equity loans.

The Discover home improvement plan is a home equity loan that will allow you to extend your residential property with additional rooms, upgrade your kitchen, bathroom etc, and install energy efficient systems. The company’s borrowing limits are $35,000 to $150,000, the interest may be tax deductible and there are no origination fees.

The home equity loan provided by this company is a one-time payment, and in order to qualify, you must have a minimum credit rating of 620. Your credit history must be fairly acceptable, and you must provide documentation to support your employment status, salary and value of your home equity.

Before applying online, you can chat with a Personal Banker between 8am and 10pm on Monday to Friday.

Apply for Loan

How to Get Funding for a Construction Project

 

Getting funding for a construction project can be tough or smooth depending on various factors such as your financial standing, creditworthiness, quality of your presentation and proposal. Every lender (or investor) wants to know what they are getting from a project or business plan. They are bound to ask you tough questions, test your proposals and ask for a lot of documents. If you want to increase your chances of getting building finance, you have to prepare the required documents, and you must know the options available for you in your region:

Prepare a Cost Estimate

The first step in securing construction finance is preparing a cost estimate for your proposed project, and you can get this estimate from a consulting quantity surveyor or certified estimator. If you already have the sketch plans or architectural drawings, the quantity surveyor will need them to prepare an estimate. You will need to pay the quantity surveyor for this estimate, since it’s a professional document with quantitative and qualitative input. Do not assume that you can get an estimate anywhere e.g. from a building contractor, because what the contractor gives you is not an estimate, but just a quote.

The quantity surveyor can prepare three types of estimates, the Superficial Floor Area Estimate, Elemental Estimate or Provisional Bills of Quantities.

Bank Rating

When you have obtained the estimate, the next step is approaching your bank to get a bank rating or letter of financial standing. If you have a good bank rating or credit score, the sponsors will view you in a positive light, but if you have negative rating, it will reduce your chances of landing a contract.

In applying for funding, you have to decide whether you will apply as an individual or as a registered company. If you are applying as a company, you might be required to submit proof of business registration and tax certificates.

Items that may be required by investors are outlined below:

  • Cost estimate
  • Proposal ,Presentation
  • Business/Financial plan with cashflow and cost projections
  • Bank rating/score
  • Letter of financial standing from your bank
  • Guarantees from building material suppliers and other creditors
  • Business registration
  • Tax certificates
  • Proof of vacant land or site on which the construction will take place
  • Building license or building plan approval

Prepare a Financial/Business Plan

Find a financial consultant to prepare a professional business plan. If you are not a business, you can still prepare a financial plan with cashflow and cost projections. Investors prefer to work with numbers and if your plan is financially viable, they will be impressed.

Prepare a Professional Presentation/Proposal

Prepare a motivational presentation that includes your mission, goals, background etc. Explain why you think your project deserves funding, how you plan to achieve your goals, the benefits of your project, the challenges, risks and how you plan to respond or mitigate the risks.

Get a Building License

If you already have a building license, investors will take you seriously. It shows your determination and resolve to go ahead with the project. As you negotiate with investors, you will be talking about land that you already have to build the proposed project. Discussing plans that have not been implemented does not instill confidence in investors.

Obtain Credit Guarantees from Material Suppliers

A credit guarantee from building material suppliers gives you an advantage as it shows proper planning on your behalf. When other creditors are endorsing and supporting your project, it’s a sign of confidence in your project, so other lenders are more likely to pitch in.

Where To Get Funding

You can get funding from multiple sources. The following are places to solicit or apply for construction funding:

  • Commercial banks,
  • Development banks
  • SME banks
  • Lending institutions
  • Property developers
  • Pension fund organizations
  • Building societies
  • Government banks
  • Investor joint ventures

The Difference between an Estimate and Budget – Construction Cost

 

A construction estimate is prepared in the early stages of a project before work on site begins. The process leading to a cost estimate begins with client consultation. As soon as the client lays down their building plans with an architect, he or she must take the blueprints to a quantity surveyor or professional estimator. The quantity surveyor will take off measurements from the drawings and calculate the cost of construction. The construction cost is the estimate that a client should budget for, if they intend to go ahead with the project.

Most of the times, the client has no idea of the costs until they are furnished with an estimate. In this case, according to the client’s financial standing, the cost might be too high or within their budget. When dealing with a client, the quantity surveyor’s role is producing accurate cost estimates based on the designs, and not on the client’s feelings. However, if the initial design is too expensive for the client, the quantity surveyor can advise the client to make alterations or produce an alternative design altogether. The client will be required to go back to the architect to suggest changes. Working with the client, the architect will revise the plans or produce alternative designs but this time a lot of consideration will be placed on the cost elements rather than aesthetics.

In designing a new plan, the architect must refer to the quantity surveyor’s cost estimate with the goal of identifying building elements which are taking too much cost. For example, expensive marble floor tiles may need to be replaced with low-priced ceramic tiles. One or two rooms may need to be removed and the plan configuration might need to be re-arranged or re-sized to reduce the costs. If the slate roof tiles are taking a large proportion of the cost, they might need to be replaced with a much cheaper variety or version, for example, asphalt fibreglass , clay, concrete tiles or corrugated iron/asbestos sheets.

The procedure whereby the architect designs with cost in mind is called “designing to a cost” or “designing to a budget”.  This is usually done when the client has a specific sum of money in their bank account set aside for the project. Designing to a cost will reduce the number of revisions which need to be made. To make it easier for the client, the architect may suggest building models which have been built in the past or which exist in the market. The cost of such models is known and if ever there is a fluctuation of price (building index) due to market conditions, an adjustment for price increase can be added to the known cost.

An estimate represents the actual cost of the proposed project, and a budget represents the client’s financial standing, capability or spending power. A new residential building might be estimated to be $200,000, and the client may only have $100,000 in their bank account. In this case, $200,000 or more is the required budget. A budget cannot be an estimate, but an estimate can be used for budgeting purposes and securing building finance from a lender.