Personal loan or home improvement loan? That is the question.
We love to decorate our houses.
And there are phases in our lives where perhaps we’ve spent too much time watching Food Food or TLC and thus have built castles in the air of visions of turning our kitchen into a chef’s paradise. Or maybe our master bathroom is just a shower away from disaster. Because we really love Italian tile in our bathrooms.
And if so, then cheers, you are not alone. Recently, Harvard University’s Joint Center for Housing Studies researched and reported that the home improvement industry should continue to post a record level of spending in 2016. For many people, this means borrowing money to pay for improvements and well-planned home decor schemes. .
Now one must face a hard, difficult, and perhaps hypothetical question.
So Which Home Improvement Loan Is Right For You?
Many homeowners and homemakers are looking to tap into the equity in their homes. But home equity loans or home equity lines of credit may not be possible or very practical for some borrowers. In that case, one should consider using a personal loan.
While it is known that one can use a personal loan for a variety of reasons, there are a few reasons why a personal loan may have advantages over home equity loans when it comes to a renewal loan, to be specific.
The process of applying for a personal loan is usually quite simple and straightforward. Your own financial situation, for example, your credit history and purchasing power; This is often the main deciding factor in whether or not to get a loan, for how much, and if so, at what interest rate. Some personal loans even boast no origination fees.
However, home equity loans or home improvement loans, on the other hand, are similar to applying for a mortgage (in fact, home equity loans are sometimes called second mortgages). The amount you can borrow depends on several factors, including the value of your home. Because you can only borrow against the equity you already have (that is, the difference between the value of your home and your mortgage), you may need to arrange for, and pay for, a home appraisal.
Let’s now look at this case in the case of a home improvement loan. With a home equity loan or a home improvement loan, you can only borrow against the equity you have, which, as a new owner, probably isn’t much. Maybe you haven’t had enough time to lower your mortgage and the market hasn’t raised the price of your home yet. A personal loan allows you to start home improvements regardless of how much equity you have. So that’s one of the benefits of availing a Home Improvement Loan.
With a home equity loan, you use your home as collateral, which means an inability to pay could result in foreclosure on your home. While defaulting on your personal loan comes with its own risks (like ruining your credit and credit score), it’s not directly tied to the roof over your head, like a gun to your head. Therefore, it is better and safer to make use of a personal loan.
So if we had to decide, which one is better, safer and more suitable?
Personal loans may not be suitable for all borrowers looking for a home improvement loan. For example, if you have significant equity in your home and are looking to borrow a large amount, you may be able to save money with lower interest rates on a home equity loan. In addition, interest payments on home equity loans and lines of credit may be tax deductible under certain circumstances; but clearly that is not the case with personal loans.
On the other hand, personal loans can make sense for these types of clients:-
• Recent home buyers.
• Smaller loans for home improvements (eg, bathroom or kitchen instead of a complete remodel)
• Borrowers in lower home value markets (if your home’s value has barely been budgeted since you moved in, you may not have much equity to use for a home equity loan).
• For those who value ease and speed.
• Borrowers with excellent credit and cash flow.
While home equity loans and lines of credit are a good source of home improvement money if you’ve already built equity in your home, a personal loan may be a better alternative if, for example, you’re a new homeowner and you need to take care of her. some updates to make your new home just right and perfect.
Concluding, we conclude that a personal loan is a better option than a home improvement loan, at any time.
