The Best Ways of Accessing Debt Funds to Finance Your Home Renovation

Most homeowners constantly think of renovating their homes. The reasons for wanting to upgrade the quality of the home can be different; some people want to make it look fresh by adding something that makes life more interesting for the family like a patio or a swimming pool while others may want to increase the perceived value of their property before they put it on the market. Unfortunately, home renovation is typically a very expensive job, and most people really do not have the ready cash in their bank accounts. However, as saving little by little can take a very long time, the only course of action that is normally left is to take a loan of some sort. Some of the more popular ways of borrowing money for home renovation:

Home Equity Loan

Home Equity Loan

If you have a home mortgage, it is possible for you to borrow up to 80% of the existing equity, which should generally suffice for a decent home renovation project. The rate of interest is fixed for the tenor of the repayment and once the loan is disbursed, you need to pay it back in equal monthly installments. The advantage of a home equity loan is that since the rate of interest is fixed, you know exactly how much to pay back every month and it does not matter whether the interest rate rises or falls. The rate of interest on home equity loans is also typically far lower than that applied on unsecured loans because your home acts as collateral security. You are free to use the money in any way you like and you do not have to tell the lender how you are going to spend the money. The biggest risk associated with a home equity loan is that if you default on the repayment, you could end up putting your home at risk of being repossessed. You will also need to pay closing cost and fees that can be quite substantial.

HELOC

A home equity line of credit (HELOC) gives you access to the funds but you need not take all the funds at one go but can ask for disbursements as and when you require funds to pay contractors or for buying home décor stuff. According to https://www.lendingtree.com, among the most significant advantages of a HELOC over a home equity loan is that you can exercise flexibility in withdrawing the funds as per your requirement so you end up also saving on the interest since no interest is payable on funds not used by you. Also, the rate of interest tends to be lower than on home equity loans besides which, you may not be charged any application fees or even closing costs, however, you should examine the terms and conditions to make sure what charges are payable by you. While the processing time for a HELOC is faster, the rate of interest is not fixed so the monthly repayment could vary according to the prevailing rate. You can request for an option to switch over to a fixed rate of interest but usually, you will need to pay the associated fees. Since your home is used as collateral security, any default will expose it to the risk of foreclosure.

Credit Cards

Credit Cards
Using a credit card is perhaps the easiest way of paying for your home renovation since it has none of the hassles of application and offering security. Many of the big retailers of home improvement products offer credit cards to customers. While these cards are very handy for shopping for home renovation projects and that too at a small discount, it is not necessary that the credit limit that you are allowed will suffice for your project. Some cards even charge you no interest or a concessional rate of interest resulting in worthwhile savings; it can be very easy to drive up a huge balance on the card that will be difficult to pay off. In addition, after the promotional period is over, the normally high APRs charged by the card companies will kick in and make your life miserable due to the extra interest burden. Missing out on the monthly payment can mean paying hefty late payment charges and a negative impact on your credit score. If you are caught in a debt trap, it can be wise to consider debt settlement using the services of a leading online agency like Nationaldebtreliefprograms.com.

Personal Loans

Personal loans are also a very convenient way of financing your home renovation project. These are typically unsecured loans that are available from banks, credit unions, or private lenders based. The amount of loan that you will qualify for will depend on the lending policy of the financier and their assessment of your financial strength based on your credit score and other parameters. Typically, personal loans are extended for tenors that are a maximum of five years and each loan is uniquely structured depending on the profile of the customer and his requirements. You are normally required to pay on an equated monthly installment basis though in special cases, the amount of the repayment at the start can be kept low and balloon towards the end of the agreement period to make it compatible with the projected cash flow of the applicant if so desired. Normally, the rate of interest is fixed and it is determined by how good your credit score is. If the market is extremely dynamic, the lender may insist on a variable rate of interest pegged to the movement of the bank rate. The application process is very simple and the disbursement can be made quite quickly. The rate of interest for applicants with good credit scores will be significantly less than the credit card APR, however, there are chances that you will be faced with a number of charges and fees.
Personal Loans

Conclusion

Renovating your home can be a very exciting process and is sure to make it more attractive and raise its market value. While borrowing funds for the project, you need to ensure that you keep the amount of the loan to the minimum and choose a lender that offers you the least overall cost. However, timely availability with the least bothersome application process can be crucial.

The Best Ways of Accessing Debt Funds to Finance Your Home Renovation was last modified: by

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