There are many different ways to borrow money for a home improvement project, but essentially your options come down to a “secured” or “unsecured” financing vehicle. These two types of loans have advantages and disadvantages.

When you borrow money with an unsecured loan, you are not offering anything up for collateral. An unsecured loan is given based on your past credit rating and your current salary level. You don’t have to have any equity in order to borrow money with an unsecured loan. Most hardware store credit cards are essentially unsecured loans. Unsecured home improvement loans can almost always be used if you have very little equity in your home.

One of the most common types of unsecured loans for home improvements is a credit card. Credit cards can be offered by a home improvement store, but they can also be offered by a number of different lending institutions. Almost any credit card can be used for a small house improvement project and the loan is almost always unsecured because no collateral needs to be put up to secure the loan. Unsecured loans are usually small and can be paid off quickly.

Secure loans are loans in which the bank has some sort of collateral or item which they technically “own” until you pay it off. When you finance a car or buy a house with a mortgage the bank technically owns what you bought until you’ve paid off the debt amount plus interest. With a secured house improvement loan your house is the collateral. If you default on your loan then the bank can take your house or car and sell it in an effort to regain some of the money they lent you.

Secured home improvement loans often have more paperwork but they also usually offer a lower interest rate because they are safer for banks to give out due to the collateral involved. You may even be able to deduct the house improvement loan interest amount from your income taxes!

Both secured and unsecured home improvement loans have a purpose and can really help you fix up your home if you don’t have the cash needed readily available. Be sure to do your homework and make sure you can actually repay the loan on time.

by James Miller
About the Author:
Want to discover more about how you can pay for that home improvement? Be sure to read about other home remodeling loan options that are available.

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