Home improvement projects can be quite expensive; some people may choose to put them off or never complete them because of these costs. One simple solution is to secure a loan from a bank or other lending institution, allowing you to pay for the project over time. No matter if it’s upgrading your home’s flowerbeds or adding locker shelves to your mudroom, it’s important to have a plan to pay for your home improvement projects before you begin. Let’s look at four tips for getting a loan to pay for home improvement projects.
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1. Have a Detailed, Written Plan
The first tip is to have a detailed plan and estimated budget to present to the bank or lender while you’re asking for the loan. If you walk up to the counter and say, “I’d like to get a loan to build a deck,” they will likely turn you away.
However, if you present them with a detailed plan with phrases like, “Using lumber from Home Depot, it would take 80 2×4 boards for the proposed deck and railing, which at $5, would total $400,” you’re much more likely to get approved. These are rough figures, but you get the idea.
2. Check Your Lender’s Policies
It’s also a good idea to check the lending policies of the institution from whom you’ll be requesting the loan to make sure you qualify. For example, say you’ve run your calculations and you estimate that you’ll need a loan of $5,200 to complete the project.
Some lenders may require collateral for loans over a certain amount. You might have to put up a vehicle or something similar to secure the loan if it’s over $5,000. If you ask for $4,900 and pay the last $300 out-of-pocket, you might not need to risk losing the family car if unexpected circumstances prevent you from repaying the loan.
3. Consider a Home Equity Loan or HELOC
Speaking of collateral, another great option to consider is the home equity loan. This allows homeowners currently paying a mortgage to borrow against the equity they’ve already built up without providing additional collateral.
A HELOC works similar to a credit card, letting you use your home equity as collateral to access funds. Both HELOCs and home equity loans typically have fixed interest rates and can finance your home improvement projects without needing extra collateral.
4. Consider All Options
Your first thought might be to get a loan from a bank with whom you already have one or more accounts. In some situations, this can be a good idea, especially as they’ll have access to your account history, and could be easier to convince you that you’ll be able to repay the loan.
However, you may be able to get better rates or more favorable terms from other banks or lenders, so don’t be afraid to shop around.
Final Thoughts
By having a detailed plan, checking the bank’s terms and conditions, leveraging home equity, and exploring all options, your home improvement loan application will have the best chance of success. Good luck!