Do you have a home renovation project in mind? Are you ready to proceed but concerned about the financial aspect? Have you given any thought to applying for a personal loan?
There is no shortage of ways to pay for a home project. For example, if you have enough cash in the bank, you may want to pay outright to avoid a monthly debt payment. Or perhaps you already have access to a home equity line of credit.
While a personal loan isn’t the right choice for everyone, there are many benefits of using one for your next home renovation project. Here’s why you should consider it:
1. No Collateral
As an unsecured loan, you’re not required to provide collateral in exchange for funds. This is in contrast to a home equity loan with which your property secures the loan. If you default, the lender has the legal right to repossess your home.
You don’t plan on defaulting on your loan, but you don’t know what the future could bring. There’s less risk with a personal loan.
2. Competitive Interest Rate
Since a personal loan is unsecured, expect the rate to be slightly higher than that of a home equity loan. After all, the bank is taking on more risk. But even though personal loan rates are higher, they’re still competitive.
3. Varying Terms
Most lenders offer personal loan terms in the 12 to 84-month range. The shorter your term, the faster you’ll pay off your loan and the less you’ll pay in interest. Of course, this also means a higher monthly payment.
If you opt for a longer term, such as 60, 72, or 84 months, you can secure a lower monthly payment. However, your rate is likely to be higher and you’ll pay more in interest over the life of your loan.
4. Fixed Monthly Payment
From a budgeting perspective, there’s nothing better than a fixed monthly payment. You don’t have to worry about any surprises along the way. Every month, for the entirety of your term, you’ll pay the same amount.
With a fixed monthly payment, you can easily see how a personal loan fits (or doesn’t fit) into your budget.
5. Flexibility In How You Use the Funds
You know you’re using the funds from your personal loan to complete a home renovation project. But what you may not know is exactly how you’ll use the funds. That’s okay with a personal loan.
Take for example a $50,000 personal loan for a kitchen renovation. You could pay $40,000 to a contractor, $5,000 for appliances, and the remainder on accessories that you purchase yourself.
This flexibility makes it easier to buy everything you want and need without adding another layer of challenges to your project.
Final Thoughts
Now, what do you think about applying for a personal loan? Does it make sense for someone in your position? Have you compared it to other options?
It doesn’t cost anything to contact a lender, ask questions, and complete an application. If nothing else, you’ll find out if you’re approved and learn more about how much you can borrow, interest rates, and repayment terms.
