Saturday, May 19, 2012

Home Improvement Loans--What You Need to Know

Home improvement loans are a specialized type of home equity loan which homeowners can use in order to make improvements. Since these improvements are designed to bolster a home's value, banks and credit unions often look at these debt instruments as an investment. But the amount of a home improvement loan, its term and the interest rate will all be determined by a few factors. Obviously, the more equity the owner has in a property the better. But even homeowners without a lot of equity can get a home improvement loan.

Secured Home Improvement Loans

A mortgage or auto loan are considered secure loans. They are classified as "secure" because there is tangible collateral involved. If a homeowner or motorist defaults, the lender can simply retrieve the collateral and sell it. Homeowners without substantial home equity might have to pledge their property as collateral. In the event if the homeowner defaults on their home improvement loan but keeps the mortgage current, the lender can still foreclose.

Unsecured Home Improvement Loans

Homeowners with considerable equity will probably qualify for unsecured loans. So, if they wind up defaulting on their home improvement loan, the lender cannot foreclose. But that doesn't make the borrower immune. The lender can still sue, attach a lien, seek a bank levy or wage garnishment.

Getting a Home Improvement Loan

Before most consumers make a large purchase, they shop around for the best deal. Don't assume your current mortgage lender will give you the best rate. It's best to compare several lenders and make a checklist of pros and cons. In today's information-on-demand age, it won't take long to determine which lenders are right for your particular situation.

Compare Rates

Take time to compare fees, interest rates and terms. Like refinancing, there will be some cash needed up front in many cases. But that shouldn't be the only determining factor. Paying a little more now may mean saving a lot more in the long run.

Read the Fine Print

There's a reason the font size is shrunk to near nothingness. Don't be afraid to ask questions, after all, it's your money. While it might be the lender that initially forks over the cash, you, not them, have to repay it.

Be Responsible If you get a home improvement loan, it doesn't mean you have to spend every penny. It's better to remain frugal and watch every dime. It's not winning the lottery, you are responsible for the money and have to repay what you take out.  For more information about Relocating to Florida see

No comments: