How To Get A Secured Home Improvement Loan

A secured home improvement loan is money granted to a borrower from a bank or lending company that is used for major home renovations. This particular type of loan is called secured because the borrower must put up a concrete asset, such as the home being renovated or a car, as collateral. If the borrower defaults on the loan, the bank or lending company has the right to seize the collateral. Properly applying for a secured home improvement loan requires a few basic guidelines to be followed. 

 

Prepare Documents

A bank or lending company will want to see an exact breakdown of how the borrower plans to spend every dollar from the loan. This breakdown includes a contract or bid from the company doing the repairs, including specific and total costs. The bank will also want to see blueprints or plans from the company doing renovations for the repairs. If a borrower cannot receive an exact cost breakdown, an estimate should suffice.

 

Prove Reliability

A bank or lending company needs to know that it will be paid back. In order to ensure that a borrower is trustworthy, the bank or lending company will want to see a borrower’s financial documents. These documents include anything that proves or disproves a borrower’s ability to pay back a loan. In this part of the process the bank will want such documents as income tax returns, proof of salary or income, proof of employment, cash flow records, debt to income ratio, and expenditure breakdowns. 

 

Explain Costs

If a bank or lending company thinks that the improvements that a borrower is making will increase the value of the borrower’s home, then the bank or lending company will be more willing to lend the money. If the home that is being improved is also the asset being used as collateral for the loan, the bank or lending company will be willing to increase the value of the loan. A borrower should clearly and explicitly state how the changes that are being made on the home will increase the value of that home. 

 

Compare Companies

As with any loan, with a secured home improvement loan a borrower needs to research lending companies in order to find the best combination of terms. Secured home improvement loans will have low interest rates because the borrower carries most of the risk, but the amount of time that a borrower has to pay back the loan (the term of the loan) can be adjusted.