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There is nothing like staying at home for real comfort.
Home has a magical place in Americans’ hearts, and lenders know it.
Because much of the U.S. economy is built on home ownership, the federal government encourages banks to lend to homeowners looking to remodel. If you want to get a personal loan for a home remodel, rest assured, many lenders will be happy to help. Interest rates on personal loans range from as low as 3.49% to as high as 36%. On average, they run from 10% to 32%. Those going for a 32% loan typically plan to remodel the house, sell it fast and repay the loan as quickly as possible.
Today’s remodeler can get more money than ever (even with bad credit), but finding the right deal has gotten challenging. Use these guidelines to get clear on your needs and limitations before evaluating different lenders. Your first step is understanding how much you will need.
HomeAdvisor.com provides estimates of how much your remodel will (or should) cost. It gives you the high, low and average prices. You can even fill in your zip code to get the most accurate figures. Lenders will ask for an estimate and accounting of your costs. They will also want a bid from a contractor that specifies labor, materials and other costs.
Create a spreadsheet or list of all the new features you’re looking for. In our kitchen example, a new stove can run anywhere from $400 to $5,000 for a premium gas range. In the bathroom, color-bathing with LED lights is the new rage. Get on board with your spouse or anyone else determining what will go into your remodel. Create a spreadsheet or list of all elements and their prices using a checklist from the internet that focuses on your specific room. Baseboards may be boring, but they cost money and that should be figured in (plus they make a room look really finished!)
Some costs homeowners tend to forget include:
Going to a contractor with a spreadsheet of remodel elements sends the message that you know prices. When he or she then estimates labor, you can check those figures against. Labor typically runs 30 to 35% of the entire remodel. Once you get all potential charges, add 20% to 30% because, as contractors often say, “there’s always a wrinkle in the rug.” Unexpected issues will arise.
Lenders consider two elements when evaluating how much of a personal loan you can get for a remodel: your credit history and your income
To prepare for lenders’ offers (several is better than one), use CreditKarma or another service to uncover your credit score. The highest loan amounts and best interest rates go to those with good or excellent credit (no late payments in the last year and credit utilization (LINK to other blog post) 50% or lower). Still, as mentioned above, lenders like home remodeling loans because the federal government likes them. Therefore, even those with fair credit can get a personal loan for a remodel. You’ll just pay more in interest and possibly get a smaller amount.
To lower their risk, lenders evaluate your ability to make your monthly payments by examining how many other debts you currently have. They add up your monthly credit card, auto and student loan payments and then divide that figure by your monthly gross income. Many banks see a debt-to-income ratio or DTI of 35% as manageable. They recognize that you have some spending money left after paying your bills. They want this extra spending money to come to them, and will be eager to provide a personal loan.
A DTI of between 36% and 49% doesn’t mean you won’t get a loan. Lenders may want you to have a cosigner. Make these calculations before you apply for a personal loan so you can be prepared to select the right loan with the best terms.
The last piece of information you need when choosing a personal loan is the interest rate and fees the bank will charge. Lenders do NOT do a “hard pull” or serious credit inquiry when evaluating personal loan applicants. Instead they run a “pre-approval” or “pre-qualification” check. This means you can review several offers before making a decision without any impact to your credit score. Once you select your lender, they make the hard pull ONCE.
Don’t let important home remodels go. A leaking roof can cause damage that multiplies your costs. First Financial has helped arrange tens of thousands of low-cost personal loans for home remodels. We have MORE loans for MORE applicants because working 100% online helps us reduce costs. Apply today!
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