Personal loans offer financial support for various purposes, one of which is home renovation. As a homeowner, if you don’t have enough money to makeover your home, secure a personal loan from a trusted lender.
Obtaining the right personal loan is a tough nut to crack. But don’t worry. Check out some essential tips below to get funded for your home renovation project.
Estimate Expenses and Plan a Budget
The initial step is to estimate renovation costs. Get detailed quotes from several contractors and suppliers to determine an accurate total project cost. The wise approach is to add a 10% to 20% margin for unexpected expenses.
Next, determine how much loan amount you may need. It’s crucial to borrow the amount your project requires. This way, you will avoid paying unnecessary interest.
Keep tabs on your current income, monthly expenses, and existing debts. So, you can calculate a comfortable monthly repayment amount. You must ensure your debt-to-income (DTI) ratio is 43% or less, because most lenders prefer a low DTI.
Prepare Your Finances
Be proactive and keep your credit score in check. Don’t you know what a good credit score is? It’s typically 670 or higher for the best rates, essential to securing a favourable interest rate.
From renowned credit bureaus, such as Experian, Equifax, and TransUnion, get your credit report reviewed to ensure there are no errors. In case any error exists, they will correct them. Lenders that offer personal loans often require documentation.
So, keep a proof of identity (passport or driver’s license), income verification (pay stubs, tax returns, or bank statements), and proof of residence. Hence, you’ll be on your way to securing a personal loan and starting your home renovation with peace of mind.
Research and Compare Loan Options
Browse a variety of financial institutions, including online lenders, national banks, and credit unions. Be aware that credit unions offer competitive rates to their members.
On the contrary, banks and online lenders offer a prequalification process. It uses a “soft credit check,” which lets you see potential rates and terms. The best part? The loan terms and rates will not affect your credit score.
It’s now time to compare the Total Cost (APR), abbreviated as the Annual Percentage Rate. This rate includes interest and any charges, such as origination or early-repayment fees.
Additionally, look at loan terms. One of them is the repayment term, which is the length of time to repay the loan. The shorter-term means lower total interest paid but a higher monthly payment. On the contrary, longer terms offer lower monthly payments but higher overall interest costs.
Sign the Loan Agreement
This step involves reading the fine print. Go into the details of the loan agreement, including all fees, charges, and terms, before you sign it.
Select a lender and complete the formal application process. This usually necessitates a “hard” credit check. Once the funds are disbursed (often within a few business days for personal loans), stick to your budget. There’s no chance of overspending on the home renovation.
