Whether you want to give your home a little refresh or a major overhaul, you may need to borrow some money to make tackling the expense more manageable. This is where home repair loans can come in handy. Essentially, these loans are designed to help homeowners afford to renovate their homes.
Keep reading to learn more about what home repair loans are, how to apply for one, and how to qualify.
A few different types of loans can be used to finance home improvement projects. Let’s take a look at three popular options.
Personal loan funds can be used to cover virtually any expense, which makes them ideal for home repairs, like getting a new roof. Once you qualify for the loan, you’ll receive a lump sum distribution of cash that you can then use to pay contractors, buy building supplies, or shop at your favorite home decor store.
One of the big appeals of personal loans is that they’re usually unsecured, so you won’t need to use your home as collateral (which can put your home at risk if you fail to repay the loan).
Related: Learn more about getting a personal loan
If you’ve built equity in your home, you can also turn to a home equity loan to finance home repairs. This is another way to access all of the money you need to borrow at once. You may have as long as 30 years to repay what you borrowed, which can help spread out the costs associated with a big renovation like a kitchen remodel.
Home equity loans come with fixed interest rates, which makes it easy to budget for repayment as you always know how much will go to interest payments.
Another way to borrow against the equity you own is to turn to a home equity line of credit (HELOC). This form of credit usually has a variable interest rate, which means it can change over time. Because it can be hard to predict what the interest rate will be at any given time (it fluctuates with market rates), it’s best to pay off what you borrow quickly.
This can be attainable, since you’re not necessarily borrowing a lump sum of cash. Instead, you have access to the full borrowing amount, but you only need to pay back the amount you end up using. Once you pay back what you borrow, you start over with access to the full line of credit again.
Before applying for a home repair loan, it can be helpful to know what you need to qualify for one.
If you do decide a home repair personal loan is your best option for financing home repairs, you’ll generally take the following five steps to apply.
- Check your credit score and credit report. Knowing what your credit score is will give you a good idea of what types of loans, terms, interest rates, and loan amounts you may qualify for. When reviewing your credit report, check for any errors you can dispute that may be hurting your credit score.
- Gather the required information and documentation. Having everything you need to apply for a loan ready will help speed up the application process. You usually need some form of identity and address verification to start. You may also need proof of income in the form of bank statements, pay stubs, and tax forms.
- Confirm your budget. Take a good hard look at your budget to see how high of a monthly loan payment you can comfortably afford.
- Comparison shop. Spend some time researching lenders and consider getting prequalified with a few. This gives you an idea of who’s willing to lend you money and the interest rates offered before you officially apply for a loan. That way, you can find the best deal possible.
- Submit your application. Once you narrow down a potential list of lenders, choose the one that best suits your needs. Then, complete the full application process by providing supporting documents.
When deciding whether a home repair loan is the right fit for your needs, it can help to keep these factors in mind.
Some home repairs can lead to a tax deduction. If you choose a HELOC or home equity loan, the interest may be tax deductible as long as you use the loan funds to make substantial improvements to your home.
While we outlined some common options for home repair loans, consider these alternatives too.
Related: Learn more about getting a personal loan