Homeowners with credit problems can often find themselves in a financial dilemma.
They need money for home improvements but struggle with getting financing. Depending on the extent of the home renovations planned, this can be a very costly endeavor.
If you find yourself in the unfortunate financial position of needing to renovate your home when you have bad credit, do not lose hope. There are ways to get the work done that you might not have considered.
1. Improve your credit score if possible.
There are plenty of lenders who are willing to loan money for home renovations.
The trouble is a borrower must have at least fair credit to qualify. If you have not already done so, review your credit report for any discrepancies and dispute anything that is not legitimate.
By raising your score even 30 points or so, it could mean all the difference to a lender.
2. Refinance and pull money out.
Many homeowners have refinanced in recent years because of the historically low interest rates available.
Even if you do not qualify for the best rates, chances are you can refinance at a decent rate and pull money out of your home.
If you have been in your home for seven or more years, this is worth looking into.
3. Apply for a home equity or home improvement loan.
Similar to refinancing, a home equity loan or home improvement loan uses the value of your home to take money out for renovations.
“Ask your lender for a loan
based on your home’s equity.”
4. Bad credit loans are an option.
Even homeowners with bad credit can find a lender willing to take a chance on them. Of course, they will usually charge a fairly high interest rate.
Bad credit loans, also called subprime loans, used to be more common than today. Still, they are out there if you look.
Try going through a loan broker to find the best bad credit loan terms for you.
5. The Department of Housing and Urban Development.
The HUD has home improvement loans available for homeowners looking to renovate. Title 1 home improvement loans and 203 (k) rehab loans are ways a homeowner can complete certain projects.
However, there are some restrictions on what the money can be used for, so consider your circumstance and research the qualifications.
6. Take a loan out against other property.
If you have anything that can be used as collateral for a secured loan, consider going this route.
However, this can be tricky, as you are likely to have a high rate of interest and must be diligent about making the loan payments each month.
Only use this method for a relatively small loan amount for minor renovations.
7. Try to barter or exchange.
If all else fails, consider using a professional who would barter or exchange services for the renovation work.
You may have something to trade or a professional service like tax preparation or bookkeeping that a professional needs.
Be creative and do not worry about offending someone. All they can say is no thank you.
Having bad credit can be difficult when you need to perform repairs or renovations on your home.
The best thing you can do for yourself is to work toward improving your credit situation. That way you can take advantage of all the benefits that come along with good credit – namely the availability of low interest loans.
Photo source: wagreensconst.com