What Exactly Is a Home Improvement Loan?

As its name implies, a home improvement loan is a loan granted for a specific purpose, namely that the funds be used to pay for improvements or repairs to your home. Usually you will have to tell the lender how you plan to used the funds and provide details of the work that you intend to carry out. In addition to improvements to the house funds could be used for work on your backyard, for instance to pay for landscaping. A home improvement loan can be either secured or unsecured, the difference being that the former uses your house as a security. In the unfortunate event that you were unable to keep up the payments, the lender would be able to foreclose on the loan. Because the lender of an unsecured loan does not enjoy this security, the interest rate charged tends to be considerably higher than for a secured home improvement loan.

Where to Get One

A home improvement loan can be obtained through various sources including banks, credit unions and many other financial lending institutions. In order to obtain the best interest rate possible, it is wise to first inquire at a bank that you have already established a relationship with. If what they have to offer is not appealing, there are many reputable financial lending companies who can provide a home improvement loan via the Internet.

The Government Can Help

There are also government agencies, located in each state, that are willing to provide a home improvement loan. Although these agencies have very strict rules and regulations, they are definitely worth looking into. These government agencies are known for allowing the home improvement loan funds to be used for such things as fire safety equipment, microwaves and ovens, stair railings, and even for the purchase and installation of an interior whirlpool bathtub.

What to Use the Funds For

While funds from a home improvement loan are often used to conduct repair type work such as putting on a new roof or updating old plumbing, many people utilize the funds for such ventures as remodeling a kitchen or bathroom, landscaping a yard or garden, completing a loft extension, turning a carport into a garage or even adding an entire second floor to a single story home.

Let the Loan Work for You

Before signing on the dotted line, be sure that you have received the best possible rates and terms available on your home improvement loan. If you take out a $10,000 loan, and the additions and repairs you make to the home raise the homes value by $15,000, then your home improvement loan has been a worthwhile investment.