Pros and Cons of Home Improvement Loans

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.

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

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.

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.