Many people’s ultimate dream is to own a house. However, it comes with some financial responsibilities. Sometimes, you might need a little help with it. If you want to give your house a flip, requesting a loan for a home renovation can be a very good option.
As much as you research, there is often a looming idea that loans are a bad deal. This isn’t true! Borrowing money, when needed, from a reliable lender that offers good contractual terms, is no problem at all. Learn more about renovation and construction loans below!
When is it best to consider a loan?
Loans are the main approach to getting money quicker than you would with your usual balance. It usually involves two parties: the borrower and the lender (a bank, the government, or any other financial institution).
Of course, there are some conditions issued within the process. When the lender asks for a sum of money, the borrower will probably run a background and/or a credit score check on them. The results can change the contractual terms included in the transaction, such as repayment period, interest rate, collateral, etc.
Because of all that’s added to the initial amount requested, it’s common that lenders refrain from even considering loans. Even though piling up too many loans can be considered a bad move, if you plan well enough, borrowing a needed amount of money isn’t gonna do much harm.
That’s why there are some conditions that you have to consider when looking for that sort of deal. Some questions to ask yourself are:
- How much money will I need?
- What am I going to use the money for?
- Is that a priority in my life?
- Will I be able to cover the monthly payments + my usual expenses?
- Do I have other debts to pay?
- Am I paying any other type of loan?
- For how long do I plan on repaying this loan?
Home loan X Construction loan X Home renovation loan
If you put everything on the table, and a loan for a home renovation sounds like a good plan for you, it’s important to learn about the different types of “home loans”. We put that on quotes because home loans are actually a totally different category, but you’ll learn more about that below.
Why do we say home loans are a separate category? Well, home loans, or as they’re better known as, mortgages, are a type of loan used exclusively to buy a house. They usually have great conditions, but the money can only be used to that one end.
It is a category because there are many types of mortgages available for the lenders and borrowers to choose from. All of them share some specifics, such as the collateral, but present different conditions.
Construction loans, also called construction financing, are also a one-end-exclusive deal. This time around, the money borrowed has to be used to build a house from scratch.
They tend to last way less than a usual mortgage and have very different conditions. Borrowers that offer this type of loan usually ask for the construction project and might inspect the build every now and then. People with a bad credit score can rely on the FHA construction loan, which is government-funded.
Home renovation loan
Like the other two, a loan for a home renovation can come in many different options. A lot of people just get a normal loan and use the money to renovate whatever is needed. However, some financial institutions grant special conditions for those who specifically plan a home renovation.
The FHA itself has the 203(k) Rehab Loan, which combines the mortgage with the home improvement loans needed. Some other approaches can be nice too, such as home equity loans.
After the loan
If you’ve already made a deal and have the loan for a home renovation in your bank account, it’s time to use that money wisely. Create a good project with a trustworthy professional and ask for their help along the way.
Even though it might seem that paying extra for professional guidance is useless, this can make the whole process cost less in the end, besides ensuring that you’re doing the right thing. Always participate and share your thoughts nevertheless.
When choosing materials and hiring helping hands, don’t try to save money by buying cheap. Be open about your budget to your renovation manager and, if something doesn’t fit the money you have right now, consider delaying it a bit. Prioritizing is important in anything that involves money.
This might be a given, but don’t forget that every loan requires repayment. The conditions vary between lenders, but plan and don’t forget to add that extra expense to your priorities.
Need a loan? OneBlinc is here!
If you have plans for the future, but your funds are not enough, OneBlinc can help you! We believe that people are more than their credit score. That’s why our methodology uses different approaches to approve loans. Get to know us!
Unexpected things happen more often than we would like them to. That’s why OneBlinc is here to help, whether you have an emergency or just need that extra cash to go through the end of the month. We believe in people, and we understand that everyone might need money someday, somehow.