Alternatives to Using a Personal Loan for Home Improvements
You can also consider financing your home improvements using home equity loans, home equity lines of credit, cash-out refinancing, or credit cards. Based on your individual circumstances, one of these may be a suitable option for you.
Cash-out Refinance
Cash-out refinances leverage your home’s equity to secure a new mortgage. This new mortgage repays the original one, and the difference is accessible to you as cash.
Home Equity Loan & HELOC
Home Equity Loans and Home Equity Lines of Credit (HELOC) are both types of secured loans where the equity in your home acts as collateral. These can also be called second mortgages. The difference is simply that a home equity loan provides a lump-sum payout with fixed interest rates, while a HELOC allows you to borrow continuously over time but may have variable interest rates.
Credit Cards
You can use credit cards to pay for smaller repairs or renovation projects as long as the amount you need to spend is less than your credit limit. You may want to look for a low intro APR credit card that allows you to minimize interest for a limited time.
Credit cards may also offer benefits such as cashback and reward points. However, using a credit card for large-scale home repairs means you will risk incurring interest if you cannot pay off your balance in full by the due date.
When should you consider a Personal Loan for Home Renovations?
Since you get a lump sum payment, it’s best to use personal home renovation loans for one-time projects or necessary repairs. For that same reason, you’ll want to stay away from using a home renovation loan for a project with an unclear cost or timeline.
If the cost of the renovations required is well below the market value of your home, then using a personal loan for home improvements is a practical choice, but it’s important to be realistic about valuations. Not every upgrade necessarily equates to a better listing price.
Consider a couple common home renovation projects and whether they will add value to your home before taking out a personal loan to finance them.
Kitchen remodeling
Kitchens can be a major selling point for homes, so undertaking a limited remodeling project can be worthwhile. Outdated appliances, cabinets or tile countertops can be swapped for more up-to-date alternatives.
Landscaping
Landscaping gives your home some instant curb appeal. Trees, in particular, are highly sought after and can add to your home’s value.
Other features like a fire pit, irrigation system, outdoor lights, a neat lawn, or even a water feature can be great additions. Considering the added value, landscaping projects could be a good fit for a personal loan.
Is a Personal Loan the right choice for your Home Improvements?
A personal loan for home improvement may be the best choice for you if the work needed is well-planned and not too large in scale. If you know the cost of your project, you can take out a personal loan for home improvement that directly matches those expenses without having to resort to alternatives.
You should also consider your ability to repay the loan. Since defaulting can hurt both your credit score and your ability to borrow in the future, it's advisable to borrow only if you know you can repay.
Personal Loans for Home Improvement: Frequently Asked Questions
What are the term lengths of Personal Loans for Home Improvement?
The loan term defines how long you have to repay the loan. Depending on the financial institution, terms length can vary, and you can choose the loan term that makes the most sense for your situation.
For home improvement projects, keep your overall spending low since you want your expenditure to be proportional to the value added to your home.
How much can you borrow with a Personal Loan for Home Improvement?
The maximum personal loan available to you for home improvements depends on factors like your income, existing debt and creditworthiness. Financial institutions offer loan amounts ranging from $2,000 to $100,000. You can apply online and depending on the financial institution receive funds the same day your application is approved.
Disclaimer: Citi offers personal loans to both existing Citi customers and new Citi customers that meet specific eligibility criteria, including an established credit and income history along with additional factors determined by Citi. If you think you could benefit from a Citi Personal Loan, apply online today.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
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