The need to have your home, office, or other personal properties reno- vated may arise in the nearest or far future. This could be something as little as repainting or as massive as a home re- modeling or extension project. Financing the ho- me renovation project is important. This is why you need to be aware of the right financing plan.
To this end, this article will examine if taking out a renovation loan, known as oppussingslån in Norwegian, is a good idea. It is advised that you go through the information here before deciding to take out a loan for home renovation or otherwise.
Advantages of Taking out a Renovation Loan
There are a couple of benefits that come with taking out a renovation loan. For the most part, these benefits will only make sense if you meet certain criteria. Some of the benefits in question include:
Financing Large-Scale Home Renovation Pro- jects
Some home renovation projects are expensive. Out-of-pocket funding will or may not cover their cost. These large-scale home renovation projects require funding options that can cater to their capital- intensive features.
A home renovation loan can be helpful for this reason. This is provided that certain conditions are met. For example, eligible people can execute home renovation projects that cost up to $100,000 in the United States with this kind of personal loan.
Increases Your Home’s Value
You might want to pay serious attention to this loan if you are in the business of selling real estate properties. This rule also applies to average people looking to get top-dollar for a property they intend to sell.
By getting funds from this sort of personal loan and using it to handle renovation projects, the value of the property is increased. As a result, you can attract more interest in your property and even start a bidding war. Essentially, experience has shown how home renovation before the sale of a property increases the margin of profit that can be gotten from the said property.
You Can Build Your Credit
Your credit score can be built if you properly handle this kind of personal loan. Although different from the regular kinds of personal loans, a home renovation loan is still a personal loan. Taking out this sort of personal loan would prove that you can handle loans of various kinds.
This would have a good impact on your credit score. However, this would only happen provided you handle it well. So, you need to be well informed on how to handle a personal loan of this kind and willing to do the required.
Easy to Budget
Some repayment plans are not fixed. As a result, the flexibility that comes with repayment can be disadvantageous. The reason is that their interest rates can rise, as much as they can fall.
There is an agreed payment rate with this kind of loan and this makes it possible to plan your budget properly. Many financial experts with interest in loans believe that this kind of personal loan is better suited for long-term home renovation projects.
There is the unsecured, as well as the secured type of this loan. As with any other kind of secured loan, the secured home renovation loan requires that you put up collateral. Opting for this kind comes with juicy offers, which include certain tax benefits. By and large, the interest rate on this kind of home renovation loan is also lower than what you would have with the unsecured type.
Easy to Process
The possibility of applying for loans online, or at least doing a lot of the application and documentation online has helped. As a result, getting your renovation loan approved as long as you are eligible is easier than ever before. Some of the things that would be needed to get your home renovation loan approved include:
- Your proof of employment – This goes to prove that you can cover your fixed repayment costs
- Identification Proof – Options include your Social Security Number (SSN), and/or your Driver’s License
- Home Document – Your title deed and/or proof of how much equity you have in the property
- Home Renovation project estimation cost – Your architect may be in a better position to help out with this
Experience has shown that getting this loan from a financial service provider that provided a first or subsequent mortgage is a lot easier. However, this is not mandatory as other conditions have to be met to get a good deal.
For this reason, you should not feel compelled to take a loan from a financial service provider just because you have a history with them. There are other conditions that make for taking out a good home renovation loan.
There are a few other benefits of taking out a renovation loan besides the ones explained above. For more information about this, you can read this article
In the same vein, you need to be aware of the several downsides as well. This will help you make informed decisions when it comes to funding your home renovation projects.
Disadvantages of Home Renovation Loans
There are a couple of drawbacks that come with taking a home renovation loan. Some of these drawbacks can be managed and do not necessarily mean that it is a bad option. By and large, some of these disadvantages include:
You May Need a Co- llateral
There are unsecured ho- me renovation loans. This means that having to put up collateral and the possibility of losing it is not always there. How- ever, there are still some secured home reno- vation loans that require putting up collateral.
The good thing about such loans is that they usually come with reduc- ed interest compared to the unsecured kind. However, failure to meet up with the terms of the loan can mean losing the collateral. This is a disadvantage, especially considering that the value of the collateral is often more than the loan obtained.
High Fees at the Expense of Borrowers
One of the claimed advantages of this kind of loan is having a fixed repayment plan. This happens as the interest rate remains the same. Although true, certain conditions can drive up the fees at the expense of borrowers.
One such is the prepayment penalty. While the ability to pay up your loan ahead of time is supposed to be a good thing, it can come with a penalty in the form of a fee. Also, some of these loans have origination fees that require borrowers to take out more than they need or reduce the amount they eventually get.
All of these fees are at the expense of borrowers. This is why prospective borrowers need to understand how these loans work before applying for them.
Comparing various financial service providers that offer these loans to borrowers is also important. For more information on how to compare these financial service providers, you can visit: https://www.bobvila.com/
It Can Hurt Your Credit
Understanding how taking out this kind of loan can either help or hurt your credit standing is a bit tricky. In the context of hurting your credit standing, this can happen when payments are not made on time.
The implication on your credit score is that you appear less creditworthy before your creditors and prospective creditors. This can make taking out other loans difficult or near impossible in some cases.
The irony is that the hurt that this loan can do to your credit standing does not only apply when monthly payments are not forthcoming as of when due. For example, your ratio for credit utilization can be skewed if this loan is not properly planned. Your debt-income ratio will have a bad look if this happens.
All this goes to say that you need to properly plan to take out a home renovation loan. A loan brokerage company that specializes in finance areas such as this will be helpful for reasons such as this.
This is as opposed to the idea that such service providers are only needed by people with bad credit scores who need lines of credit. So, you should consider such service providers to navigate the tricky world of getting and handling such loans properly.
Taking out a home renovation loan can be a good as well as a bad idea. It depends on certain variables and the information here can help you make the right deci- sion. So, you should bear the details here in mind when you decide to get this kind of loan or otherwise.