Weighing the Pros and Cons of Home Improvement Loans

After living in your house for a very long time and observing the need to improve its aesthetics and comfort, you might decide whether it’s time to make some renovations. Whilst home repairs and upgrades can do wonders to your home and even add value to it; these will require a lot of money — from purchasing construction supplies to hiring a group of project home builders and other related expenditures. In case you don’t have enough budget to start the project, that is where home improvement loans come in. 

Ever heard of home improvement loans? 


Different financial institutions are offering this type of mortgage to homeowners who need cash to improve their homes. Similar to other types, home improvement loans can be secured or unsecured. 


How do you determine which is the better option for you? 

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Sometimes called a home equity loan, the secured home improvement loan is something that uses your house as collateral. A secured type allows you to borrow a higher loan amount that is payable within 10 to 15 years. The unsecured home improvement loan, on the other hand, uses no collateral — causing a bigger risk to the lender but less risky for the borrowers. The only risk for you is that it tends to offer a smaller loan amount with a higher interest rate and is payable within 10 years or less. 

Now, let’s weigh the pros and cons of taking out a home improvement loan to help you arrive at a better decision. 

The pros and cons of taking out a home improvement loan


  1. You can find several financial institutions that provide competitive rates on home improvement loans, allowing you to borrow the preferable amount you need without really breaking the bank when repayment comes. 

  2. The preferred grace period of 10 to 15 years gives you more control and flexibility when it comes to financial management.   

  3. By taking out the right amount of loan, you can pursue high-level improvements such as home extensions or conversions. 

  4. A home improvement loan allows you to start the project for needed repairs as soon as you want, so you don’t have to postpone the repair and start until you save up enough money. 

  5. It helps add considerable value to your house by recouping the cost of the loan should you decide to sell your house in the future.  

  6. Secured home improvement loans are available to bad credit consumers as they have increased security. 

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  1. Failure to keep up with repayment dues for secured home improvement loans could make you lose the house that you have invested in with time and money. 

  2. You have to be very careful when choosing a financial institution because some lenders are charging a wide array of hidden fees such as setup charges and early redemption fees. 

  3. You could devalue your property if you consume the home improvement loan in building upgrades more than focusing on the substandard work.    

  4. The number of credit requests and rejected applications for home improvement loans will be recorded on your credit history, causing your credit report to lower a bit. 

  5. You need to make sure that you are making the right payment on time as interest rates tend to increase in the near or far future, especially during a poor or fluctuating economy. 

  6. Even if it adds value to your home after pursuing a few upgrades and renovations, you might still find yourself stuck with negative equity when you take out a large number of home improvement loans whilst house prices fall for some economic reasons. 

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