Home improvement or renovation requires money- for the materials, workers, etc. What if the your budget is not enough? You can borrow from lenders, of course but what if you don’t have a property to submit as collateral? Does it mean you have to forget about the whole home improvement thing?
You can try applying for an unsecured home improvement loan. This type of loan is actually based on the merits of your application and not on your collateral. However, it is important to note that unsecured loans have higher interest rates than secured loans due to the high risk involved.
Unsecured loan for home improvement is recommended for homeowners with limited equity but have solid financial history. Improving your home is important especially if your home is built years ago. It is not only for you and for your family’s safety but it also increases the value of the property.
Things to Remember When Applying For An Unsecured Home Improvement Loan
State Your Reasons
Cite the reasons why you are seeking a loan. Better to include all the quotes you have received for the improvements. A lender, especially if you plan on dealing with a bank, needs to code your loan appropriately.
Check your credit report
You must check your credit history when before applying for an unsecured home improvement loan. You have to render an explanation if your credit history shows any previous flaws such as bankruptcies and defaults. A borrower’s credit score and financial history will be closely scrutinized especially since no collateral is required.
NOTE: A record of bankruptcy can only remain in your credit report for up to 7 years. If it has been passed 7 years, be sure to request the credit bureaus to remove this remark from your report. There will be instances wherein these things still show in your credit history. If this is the case, be ready to explain the exact circumstances that caused the default and point out how the circumstances have changed.
Submit Additional Information
Most lenders are more lenient to borrowers who have consistent employment history and have stayed with the same employer for a few years. If your salary has increased incrementally during your tenure, this will help to validate your financial security.
For people with bad credit, it is an additional requirement for them to submit character or other financial references. If you have rented in the past, your landlord is a great resource to prove that you are credit worthy.
Negotiate the Terms of the Loan
Let us say that your application has been pre-approved. Do not hesitate to negotiate the terms of the loan. Although the loan is unsecured, you can still request for a lower interest rate, particularly if you have excellent credit history.
Your chosen lender may give you the option to choose the length of the repayment term which can raise or lower your interest rate accordingly. Discuss fees and penalties with your chosen lender. Make sure that you understand every rules and terms stipulated in the contract before signing up.
About the Author
Sandra Thompson is a loan consultant with Unsecured Loans Now and has been providing consumers and business owners with Unsecured Loans since 1989. For years she has helped people with loan and credit problems especially pertaining to Unsecured Personal Loans, Business Loans and Unsecured Credit Cards. Copyright 2010.