Friday, November 28, 2008

Loan for Home Improvements for People With Bad Credit

By Maxwell Smithson

Financing any additional work on your home from a loft conversion to remodeling the master bedroom is going to be expensive and unless you have a large amount of money in savings you will need to arrange a loan for home improvements. Home improvement can be costly, involving contractors, supplies, and tradesmen such as carpenters, plumbers, roofers, and electricians.

Whilst most homeowners are eligible for a home improvement loan, if they do not have a good credit history, they may be required to use their home as equity for the loan. The last responsibility a new homeowner wants is that of it being used as equity for a loan to improve it. Fortunately for the homeowner, an unsecured home improvement loan is available with a fifteen year repayment term if required.

The primary stipulation when applying for an unsecured home improvement loan is the income level of both the owners (where this applies) but the amount of the loan must not be higher than the amount allowed by the county law where the property is situated. Whilst the lenders do not hand over the money without making some checks first on the property and the applicant, these checks are just to provide some security for the lender and home improvement loans are processed quite quickly.

The difference with a secured loan just means that the value of the property is taken into account and if there is spare equity then the loan is basically taken out of this. This type of loan is not a new mortgage on the home however and is much faster to organize but because the house is being used to secure the loan should anything go wrong, it does benefit from lower interest rates.

The lender will only provide funds based on the current equity available on your property. Although the value of your home is required, it will also take into account how much you owe both on the house and personally.

The next stage is to factor in all this information before a final figure they are prepared to lend is put before the homeowner. Normally a lender will lend to the upper limit of the house valuation but a few lenders go much further and provide loans up to 125 percent of its valuation.

Because you are borrowing against your home, it is important that you borrow carefully and you do not overextend yourself or you will be putting your house at risk, at the hands of the creditors. It is never a good idea to borrow more than you can afford to repay, no matter how noble the cause so if remodeling will cause financial hardship, restrict the loan to cover just the essentials of maintenance and leave the remodeling until another time. - 15485

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