LOS ANGELES, April 04, 2022 (GLOBE NEWSWIRE) — Home improvements can potentially increase the value of a home. This provides the homeowner with more equity that they can leverage for a home equity loan or line of credit. In addition, it allows them to demand a higher selling price if they decide to sell their house.
Home improvement projects can be a big financial undertaking. But with the help of a home improvement loan, homeowners can get the financing they need to start this project. To successfully complete their renovations while maintaining a solid financial footing, homeowners should carefully consider the following four criteria when choosing a home improvement loan.
1. Loan amount
Borrowing too little can prevent the owner from covering the rest of the cost, leaving the project unfinished. On the other hand, too large a loan can burden the owner with higher monthly payments and more interest. Thus, homeowners need to know approximately how much their home improvement project will cost. This will help them determine how much loan they need to borrow to pay for the project.
2. Reimbursement terms
The repayment term measures the time the homeowner has to repay the loan. Short-term loans tend to have lower rates, which could save the homeowner a significant amount on interest payments. But it also means that the owner will have to make much larger monthly payments to repay the loan in a shorter time. Homeowners who want to minimize the money they lose in interest should get a shorter term loan.
In contrast, a long-term loan gives the homeowner much more time to distribute the loan balance. Monthly payments are much lower, but keep in mind that they may end up paying more money in interest.
The annual percentage rate, or APR, measures the annual interest rate of a loan. The APR is basically the cost of borrowing money – the higher the rate, the more the borrower pays to take out the loan. Borrowers should shop around for the lowest rate possible. But it’s important to remember that other factors can impact APR, so borrowers should weigh a loan’s features against its APR to find the right option for their situation.
4. Secure vs. Insecure
Secured loans require the borrower to post an item as collateral. The lender can seize this collateral to cover its losses if the borrower does not pay. Secured loans generally have lower requirements, come with lower interest rates, and offer larger amounts at the risk of the borrower losing something they value.
On the other hand, unsecured loans do not require collateral. The borrower does not have to risk any of his property. But since unsecured loans are riskier for the lender, they can sometimes have stricter requirements and offer lower amounts and higher rates. Borrowers need to consider if they have an item they are willing to risk giving up when deciding if they want a secured or unsecured home improvement loan.
The bottom line
Completing a home improvement project without breaking the bank is possible if the homeowner gets a good home improvement loan. To find the right loan, homeowners must first know their budget. From there, they must decide how long of the term they want and whether they want to use guarantees. Finally, they should shop around for the lowest APR possible without compromising these factors. As long as homeowners do their research and compare options, they should be able to get a loan that allows them to improve their home within their budget.
Notice: The information provided in this article is provided for guidance only. Consult your financial advisor about your financial situation.
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