What’s the Difference Between a Home Improvement Loan and a Personal Loan?
What’s the Difference Between a Home Improvement Loan and a Personal Loan?
If you are looking for home improvement loan advice, one of the first questions you might ask is “What is the difference between a home improvement loan and a personal loan?”
Truthfully, a home improvement loan and a personal loan aren’t different things. On the contrary, a home improvement loan is actually a specific type of personal loan. The only major difference between a home improvement personal loan and another type of personal loan—such as a loan to pay for a vacation or to consolidate bills—is that the loan is intended specifically for renovations or other home improvement expenses.
Personal Home Improvement Loans vs. Home Equity Loans
However, just because there is a type of personal loan meant for home improvement purposes doesn’t mean that this type of loan is the only way to finance a home improvement project. In most cases, borrowers will consider two options for this type of project: the aforementioned home improvement personal loan and a home equity loan.
A home equity loan is a type of secured loan, which means it is “secured” by a specific piece of collateral. In this case, you are putting up your house as collateral to secure the loan. You are borrowing money against the equity that you have in the house. This collateral acts as a guarantee to your creditor that you will pay the loan. In a situation where someone with a home equity loan failed to make payments, the creditor would be at liberty to seize the house to settle the debt. It isn’t uncommon for a homeowner seeking to update or renovate their home to use a home equity loan as a means to get the cash necessary for the work.
For some borrowers, though, the idea of a home equity loan can be a bit nerve-racking. Put simply, once you’ve built up equity in your home, you probably don’t want to put that equity in jeopardy by offering it up as collateral. The idea of an unsecured loan—one in which the creditor does not require the borrower to put up any sort of collateral—is more appealing to most homeowners.
Therein lies much of the appeal of the personal home improvement loan. A home improvement loan works in the fashion any unsecured personal loan. It is not guaranteed by your home, the rate you receive for the loan varies depending on your creditworthiness, and the rate is fixed, which means you can reliably schedule monthly payments into your budget.
Not only do unsecured personal home improvement loans feel more welcoming to most homeowners than secured home equity loans, but they are also faster and more convenient. The process of getting a home equity loan approved is a lengthy one, involving home appraisals and assessments of equity. As a result, the entire lending timeline moves faster with a personal loan.
Home Improvement Financing Options at Resource One Credit Union
At Resource One Credit Union, we offer an especially fast turnaround time for home improvement loans. Once you have worked with us to apply for and establish credit union membership, we can offer you unsecured personal home improvement loans up to $25,000 with possible same-day funding. Our home improvement loan rate starts at 5.99 percent APR—remember though, it will vary depending on your credit rating and credit history.
Personal loan credit unions such as Resource One Credit Union are ideal spots to start your home improvement journey. We know the pain points that homeowners typically face when trying to get financing for home improvement jobs. We also know how to provide quality financing options that minimize risk and cost while still giving you the capital you need to get started. To learn more, or to ask for home improvement loan advice, contact us today.
Sources: https://www.earnest.com/blog/home-equity-loan-vs-home-improvement-personal-loan/
