Securing a Bad Credit Home Improvement Loan
A bad credit home improvement loan can make home improvement dreams possible for those who have had credit problems in their past. Many people make the mistake of thinking that they can't get a loan for home improvements because they have a poor credit history. Borrowers with bad credit can obtain a bad credit home improvement loan by following a few important steps.
Weigh Unsecured vs. Secured
A number of factors can determine which kind of bad credit home improvement loan is best for you. These include:
- Your property - If you own a home, an automobile, real estate, or a piece of property of value, you will likely qualify for a secured loan, which will have a lower interest rate and more favorable terms than an unsecured loan.
- Your earnings - Determine the maximum amount you can afford to pay each month if you take out a bad credit home improvement loan. Remember to leave a comfortable cushion. You don't want to live paycheck to paycheck to meet the monthly payment.
- How much you need - Get estimates for the home improvements for which you need credit. You should not take out more credit than you need. The less credit you need, the more advantageous an unsecured bad credit home improvement loan may be, assuming you qualify.
When you have bad credit, you're more likely to get a home improvement loan if you have collateral. Plus, a secured bad credit home improvement loan is likely to have more favorable terms than an unsecured loan. However, some people may prefer higher-interest unsecured personal loans because their property is not completely at risk should they default.
Step 1 - Decide on Kind of Bad Credit Home Improvement Loan
Once you've decided on an unsecured or a secured bad credit home improvement loan, you have a number of options from which to choose. If you own a home, the credit limit you have on a mortgage may be renegotiable or you can take out a home equity line of credit or a home equity loan (a.k.a. a second mortgage). You can also take out a secured personal loan against a car or piece of property, or an unsecured personal loan with potentially high interest rates due to your bad credit.
Step 2 - Look Into Home Improvement Grants
Although government grants are unlikely to cover your entire expenses, if you have bad credit because you run a low income household, you may quality for a government grant through the U.S. Department of Housing and Urban Development (HUD). Any home improvement grant you can secure will reduce the amount of credit you need to take out on a bad credit home improvement loan.
Step 3 - Seek Multiple Lenders
Even if you have bad credit, you're not stuck with only the high-interest "cash stores" for loans. Approach banks and credit unions in your area about their bad credit home improvement loan offers. If you're seeking a secured loan especially, you will have the bargaining chip necessary to explore your options. Decide on a bank or credit union only once you have weighed all offers.
Step 4 - Closing on a Bad Credit Home Improvement Loan
Once you have decided on a lender, set up an appointment to close on the home improvement loan of your choice. Don't be afraid to ask questions and take the time necessary to read the contract in detail. You should have your lender clearly explain all fees associated with the loan, including any possible prepayment penalties.