How to get a renovation loan with less-than-stellar credit

Estimated read time 3 min read

It is very difficult to obtain a loan if your credit score falls below 680. It can be difficult to get a loan if you have a bad credit score or a fair one. It takes an average of seven years to make a significant difference in your credit rating. How can you finance home improvements when the time comes?

How to get the funds you need for home improvement

It is very difficult to get a mortgage when you have a bad credit rating. Lenders are taking mortgages very seriously, regardless of how small they may be. Few lenders will risk lending to someone who has a poor track record, even as the terms of loans are slowly being relaxed. A home improvement loan, however, is another story. There are still options available to you, even if your credit is bad.

Do your research to understand the pros, cons and features of each home improvement loan. It may not be worth it to take out a loan just because it looks attractive.

Here are some types of loans you should consider as you research your options.

1. Take out a personal loan

Personal Loans are very attractive due to the simplicity and ease of application. Online, you can apply for a personal loan with a lender directly and receive a decision immediately. If you get approved, great! If not, try another option.

Personal loans are a great “first step” for people with bad credit. While lenders may be hesitant to work with those with poor credit, those with fair credit can get consideration. You have many options online because there are so many lenders.

2. Benefit from Government Loans

Did you know the U.S. Department of Housing and Urban Development offers a number of programs that can help homeowners rehab their old homes and repair rundown houses within certain neighborhoods?

Streamlined (203(k) Program is one example. It allows homeowners to finance up to $35,000. This could be an option for you if you are in the buying process. HUD also offers a number of other programs.

3. Find a Private Loan Lender

Who says that you must go through the government, a bank or a lending company to get financed? You can also use a hard money loaner if you are able to find someone willing to lend you the funds.

Hard money lenders are interested only in your ability repay the loan. They don’t care about your credit score. This type of loan usually has higher interest rates. Do your research before signing and consult an attorney to review the terms.

Don’t Give Up on Your Home Renovation Dreams

It’s easy for you to become discouraged after being rejected by a bank. There are other options. Do not give up your dreams of home renovation. Do your research, consider all the options, and make the best decision for your family, your home, and yourself.

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