Pros and Cons of Home Improvement Loans

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  • Personal

  • HELOC

  • FHA 203k

  • Fixed Rate

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Personal loan asset

Personal loan

A personal loan is a line of credit secured by your home that gives you a revolving credit line to use for large expenses or to consolidate higher-interest rate debt on other loans such as credit cards. The loan amount is paid over the life of the loan – which could be from 12 to 84 months.

Qualifying for a Personal loan

To qualify for a personal loan, you need to check your credit score, search for ways to improve it, check for rates and look for a lender, among other requirements. You can check out our full guide on how to get a personal loan to get the full breakdown of the steps.

What are the key features of personal loans?

Loan Amount & Tenure
The amount of this unsecured personal loan can vary between $2,500 and $100,000. The term or length of the unsecured personal loan ranges from 24 months to 72 months

Fixed Interest Rate
A personal loan comes with fixed interest rates/ annual percentage rates, and fixed monthly installments with full principal & interest amount

Early Termination Fee
It might come with an early termination fee in the first 12 months and usually offers a limited repository of lenders

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Home equity line of credit (HELOC)?

A home equity line of credit, also known as a HELOC, is a type of loan taken against the equity in your house. It’s similar to a credit card in that it lets you borrow money up to a specific limit and you can repay the funds over time. A HELOC usually has lower interests rates than other common types of loans. Plus, the interest is usually tax deductible.

Qualifying for a HELOC

To qualify for a HELOC, you need a low debt-to-income ratio, a credit score of 620 or more and good home value (at least 15% more than you owe). You can learn all about it in our full guide on how to get a HELOC loan

personal loans
FHA 203k loan asset

FHA 203k

An FHA 203k renovation loan is a unique type of government-insured mortgage that can cover your home purchase as well as improvements to it. So you can finance the purchase price of your house and the cost of your home remodeling projects, including materials and labor, through one transaction.

Qualifying for a FHA 203k

One of the most important requirements for an FHA 203k loan is that your home improvements must be completed by a licensed contractor and approved by an FHA appraiser or a HUD consultant. You cannot do the work yourself as a DIY project. Check our full guide on how to get a FHA 203k renovation loan to be sure you have all the facts straight.

Compare Home Improvement Loan Options

 
Interest Rate

Adjustable – will
change periodically

Fixed–will not change

Monthly Payments

Payment changes when interest
rates changeMonthly interest-only
payments during draw

Fixed for life of loan Full
principal and interest
payment monthly

Term (length of loan)

Available terms between 10
years and 30 years

Available terms between
2 years and 7 years

Min & Max Loan Amount

$5,000 to $500,000

$2,500 to $100,000

Borrower Qualifications

Requires good credit, good
income and low debt-to-income
ratios

Requires excellent
credit,good income and
low debt-to-income
ratios

Closing Costs and Fees

Lower cost and fees than
conventional and FHA
loans Depending on LTV, may only
require limited appraisal
May have balloon payments and
annual maintenance fees

No fees or very low fees
No appraisal needed May
have early termination
fee in first 12 months

Application, Timeframe and Availability

Limited application 30 days or less
Available through most banks
and credit unions

Short online application
3–5 days Limited
sources

Conventional Fixed Rate Mortgage

Fixed-rate mortgages have interest rates that are fixed, meaning they do not change over the life of the loan. And because the interest rate is fixed, the monthly principal and interest payment is the same each month and the loan is paid off in full by the end of the term. The most common loan terms (the length of the loan) are 15, 20 and 30 years.

A “conventional” fixed-rate mortgage refers to any commonly available fixed-rate mortgage that is not issued or guaranteed by the federal government.

Fixed rate loan asset

Qualifying for a Conventional Fixed-Rate Mortgage

This type of mortgage is one of the most common types of conventional loans. You need to make the same monthly principal and interest payments throughout the loan term. Take a look at our full guide on mortgage loan types to explore more about it.

Compare Loans

 
Interest Rate

Adjustable – will
change periodically

Fixed–will not change

Monthly Payments

Payment changes when interest
rates changeMonthly interest-only
payments during draw

Fixed for life of loan Full
principal and interest
payment monthly

Term (length of loan)

Available terms between 10
years and 30 years

Available terms between
2 years and 7 years

Min & Max Loan Amount

$5,000 to $500,000

$2,500 to $100,000

Borrower Qualifications

Requires good credit, good
income and low debt-to-income
ratios

Requires excellent
credit,good income and
low debt-to-income
ratios

Closing Costs and Fees

Lower cost and fees than
conventional and FHA
loans Depending on LTV, may only
require limited appraisal
May have balloon payments and
annual maintenance fees

No fees or very low fees
No appraisal needed May
have early termination
fee in first 12 months

Application, Timeframe and Availability

Limited application 30 days or less
Available through most banks
and credit unions

Short online application
3–5 days Limited
sources



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