Sep 24

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