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8 Alternatives to Home Improvement Loans You Need to Know

April 4, 2021
Alternatives to Home Improvement Loans

Replacing your roof, painting your home, or remodeling your kitchen can be a costly proposition. However, if you pick the correct home improvement project, your investment can undoubtedly pay off over the years in terms of improved resale value and personal enjoyment.

The problem is that not everyone has the money to pay for home improvements or upgrades in advance. And that is where home improvement loans can be useful. Home improvement loans are valuable for funding:

  • Home repairs
  • Green homes
  • New exteriors
  • New swimming pool, porch, patio, or deck
  • Bathroom remodels
  • Kitchen remodels

Home improvement loans help homeowners pay for much-needed upgrades and repairs over time without using emergency savings. For a little help, here are the eight popular home improvement loan alternatives that you need to know. Read on!

Personal Lines of Credit And Personal Loans

Personal Lines of Credit And Personal Loans

Personal lines of credit (LOC) is like a personal loan, but aside from borrowing a single payment all at once, the debtor can invoice a line of credit as required for several years. A personal line of credit can aid people to avoid borrowing more than the amount of money they need to. It allows them to receive cash as they most need it. 

However, for people who do not cautiously track or trace their borrowing, a personal line of credit can make it easier and uncomplicated for them to borrow more than the amount proposed. A lot of small draws on the LOC over time can undoubtedly append to a more substantial amount borrowed. 

On the other hand, personal loans offer borrowers or debtors a loan made without an asset given as security. It can be leveraged for any purpose. A lot of people opt to use a personal loan to consolidate debt, pay for vacations, to start a business, etc.

A personal loan is like a home improvement loan. It’s far from a home equity loan. By that we mean, personal loans do not need collateral and won’t put your assets or home at risk. As such, a more considerable loan amount or lower interest rate might be available by acquiring a secured personal loan instead of an unsecured one.

Loan fees and borrowing minimums are low. Plus, you can obtain a personal loan despite not having home equity. Personal loans tend to get funded quickly. There are many personal loan services, such as CreditNinja personal loans that can help you out.

The repayment period for a personal line of credit or personal loan is typically shorter compared to a home equity loan. The debtor might pay less in interest as a result. However, monthly loan payments can be higher. 

Traditional Home Improvement Loans

Traditional Home Improvement Loans

This type of home maintenance loan allows homeowners to borrow a single payment to pay for the much-needed materials and labor to finish home remodeling projects. Online lenders, traditional banks, and credit unions provide home improvement loans.

Keep in mind that these are unsecured loans. The homeowner does not give any collateral for the credit. Thus, the interest rate will be lofty for a home equity loan or other secured loans. The interest rate will rely upon the credit score of the borrower, the amount borrowed, and the loan term. 

P2P Loans

P2P Loans

With P2P loans, you can obtain or acquire an unsecured credit for your home maintenance or remodeling project. Your credit will be financed by multiple investors who usually offer small amounts of cash to various loans to make their risk more diverse.

You will make a monthly payment that’ll feel like paying another loan. With regards to other creditors, your credit score will decide what your interest rate will be, your repayment period, and the loan amount.

Since peer-to-peer loans have reasonably short repayment periods of at least five years, thus, you will break out of your debt efficiently and will not be paying interest over the years. Also, you can get a P2P loan even if your credit score isn’t good. However, you’ll be paying higher interest rates if you are approved.

It is difficult to envision a scenario wherein it makes sense to pay 30 percent interest for a home remodeling project. However, if you are distressed, a P2P loan with a lofty interest rate can be an ideal choice than billing the price to a credit card with a lofty interest rate. 

Keep in mind that since you will be obliged to repay the P2P loan within a couple of years. Not like a credit card balance, wherein you can prolong and pay interest on forever.

Cash-Out Refinance

Cash-Out Refinance

In this type of loan, you obtain or acquire a new loan to swap for your mortgage. However, rather than borrowing the same loan amount, you borrow more. For example, your home or property is worth 240,000 dollars, and you owe 120,000 dollars on your mortgage

In a cash-out refinance, you could obtain a new loan for 192,000 dollars. Once you pay off your 120,000 dollars mortgage, you’d have 72,000 dollars to invest in your home improvement projects. 

Undertaking a cash-out refinance means it’ll take you a long time to pay off your asset. However, it offers you opportunities to the lowest borrowing rates possible to pay for home repairs or upgrades.

Creditors usually necessitate homeowners to keep some equity after doing the cash-out refinance, generally 20 percent. Therefore, you will need lots of capital if you choose to undertake this option. Moreover, you need to have a good credit score, need to be employed, and fulfill all the requirements to acquire a mortgage.

Home Equity Line of Credit, Home Equity Loan, Or A Hybrid

Home Equity Line of Credit, Home Equity Loan, Or A Hybrid

Home equity lines of credit (HELOCs) and home equity loans are well-known ways or methods to pay for home remodeling projects since they have long repayment periods. Meaning, these loans have low monthly payments.

Additionally, the interest can be deducted from taxable income. They are secured by your asset and has low-interest rates. However, there’s a small risk of forfeiting your home when you get this kind of loan. 

Keep in mind that if you cannot pay off the debt, the creditor can foreclose. Also, if you take at least thirty years to pay off your HELOC or home equity loan, it can typically cost you a lot in interest compared to a short-term loan with a lofty interest rate, for instance, a personal loan.

Home equity loans allow you to borrow a single payment all at once. On the other hand, a home equity line of credit will enable you to take out on a LOC as required for several years. It is called the draw period.

Throughout this period, you just have to pay the loan interest, making the monthly payments relatively small. However, later on, it could result in payment shock when the draw period comes to an end, and the debtor must pay the principal as well.

Moreover, the initial rate of a home equity line of credit is less than a home equity loan. However, in the long run, it can increase if market conditions thrust interest rates up.

Alternatives to home improvement loans

FHA Title I Property Improvement Loans

FHA Title I Property Improvement Loans is ideal for homeowners with little equity. They can use this kind of loan for home upgrades that make a home more useful and liveable. It includes energy conservation improvements and accessibility improvements.

FHA Title I Property Improvement Loans cannot be leveraged for high-end items like outdoor fireplaces or swimming pools. Loans at least 7,500 dollars are typically unsecured, and most homeowners can loan at least 25,000 dollars for twenty years to enhance and boost a single-family home.

The creditor decides the interest rate. You will need to look for an FHA-approved Title I creditor to obtain or acquire this kind of loan. Just like any loan, you will need a demonstrated capability to pay off the loan and a good credit.

Local Government Loans

Local Government Loans

Most local governments provide loans to aid homeowners, particularly the elderly and those with low income, pay for home maintenance, repairs, or upgrades. St. Paul, Minn. and Boulder, Colo. are two examples of such programs. 

0% Introductory Rate Credit Card

0% Introductory Rate Credit Card

If your credit score is quite excellent, then you could get approved for a brand-new credit card. It will bill you no interest on current purchases for at least eighteen months. The good thing about this option is that to keep the zero interest rate, you will need to make low monthly payments every month, including the zero-interest introductory period. You must have a clear-cut plan for paying off the whole loan amount before the introductory period comes to an end. Otherwise, you’ll need to pay interest on the outstanding balance, generally at a very lofty rate. 

If you have difficulty paying off debts, meeting deadlines, or keeping your finances organized, then this option is not good for you. Debtors who spend within what they can afford, detail-oriented, and disciplined could find this option ideal. 


There are a lot of ways or means to pay for home remodeling projects or improvements, from personal loans to local government loans. Whatever type of loan you are choosing and which creditor you’d like to work with, taking the time to shop around will aid you in ensuring that you are getting the best terms and rates on your home improvement loan. 

Author Bio

The coffee sipping and sudoku solving Tiffany Wagner, enjoys reading and writing about finance and business related topics. When she’s not sharing her work with her readers, you can easily find her in a bookstore or library, looking for something to read on.

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