You might want to spruce up your abode but do not have the funds on hand to do so. You might consider taking out a loan to do this or a home equity line of credit (HELOC). Maybe you purchased a fixer-upper though and you do not yet have enough equity in your home to obtain the loan or HELOC you need. You can only obtain a loan for approximately 80 percent of your equity, so if you put $10,000 down on your home, you would only qualify for $8,000 as a loan or a HELOC.

So, how the heck do you quickly obtain the funds to make the $20,000 of renovations the home needs? You apply for a personal loan. This might seem unreasonable if you just obtained a mortgage, but that depends on the program through which you obtain the mortgage. Many federal programs exist to help those in the military or veterans of the military, as well as first-time home buyers, rural home buyers, etc.

If you obtained your loan through one of these federal programs, the chances are good that you will still qualify for a personal loan. You can obtain a personal loan using collateral to make the interest lower or to increase your chances of obtaining a loan. Similar to a HELOC or home improvement loan, you can use the personal loan for anything.

This means whether you need to upgrade the plumbing or the electrical or you need to tear down the existing deck and replace it, you can use the money for that. Some important differences exist between a personal loan and a HELOC or home equity loan. The biggest difference you will probably find is the interest rates. While obtaining a mortgage offers you a multitude of low-interest and no-interest loan options, Home Improvement Loans charge a much higher interest rate. You could end up paying the same interest rates as a credit card – up to 20 percent.

If you just gasped, you could earn a better rate if you have a superb credit score (Check your score on You could only pay about five or six percent interest that way. The other item to consider is that you need to show you have the money in the bank or the guaranteed earning power to repay both loans at one time. This often requires a letter from your employer proving your employment, the term of your contract, and your annual salary.

You will need to build substantial credit to obtain two such major loans at one time. Most individuals who purchase a fixer-upper to live in have do-it-yourself skills to complete the work on their own, or they work as construction professionals. This lets them quickly make updates and hang out an “apartments for rent” sign. The other category of fixer-upper purchasers includes those who flip houses.

They obtain a specialized type of loan that only lasts while they upgrade the home and sell it. Called a bridge loan, these loans provide a quick infusion of funds for house flipping. They provide short-term, collateral-backed money to allow the real estate investor to purchase and fix the property for a quick re-sale that makes them a profit. These loans charge high interest rates but enable the investor to purchase and earn a relatively good return on investment (ROI).

While they cost more, they provide an easier-to-obtain loan than a personal loan. This lets them hire someone to renovate before putting it up for sale again, at which time the new buyer will say, “‘appraise my home” before I buy it, so I know I am getting a good deal.” You can learn more about how to effectively use personal loans to improve your home at, one of the many Goalry brands. Register today for a member key on any of our sites. The member key costs you nothing and you can improve your finances by learning how to effectively manage money and improve your home.

Is it a good idea to use a personal loan to make home improvements?


A personal loan can be a great option to finance home improvements, whether you need it for small or medium-sized projects like new windows or room renovations. It all comes down to your financial history and financial health. It is important to understand both the potential benefits and the downsides of a personal loan before you apply for one to finance your next project.


1. Your home is safe


Your lender may foreclose your home if you are unable to repay your home equity loan. Although unsecured loans for home improvements can still be placed on your house, they are usually not able to pay it. The lien makes it more difficult to sell or refinance. The lien won’t cause you to be kicked out like a foreclosure unless the creditor is granted a writ to execute from a judge in order to force your property to sell.

2. It is easier to keep your borrowing under control

A personal loan amount can be fixed at the time your loan application is approved, unlike a HELOC which allows you to borrow for a 10-year period. Many personal loans have lower minimums than HELOCs or home equity loans. These require that you borrow at least $10,000. Personal loans are a great option for home improvements that cost less.

3. You will pay less fees


Origination fees are sometimes charged for personal loans, but not all the closing costs associated with HELOCs and home equity loans. This includes appraisal fees, application fees, points, annual fees and title search fees. It also includes mortgage preparation fees, filing fees, early repayment fees and mortgage preparation fees. These upfront costs should be included when comparing the cost of a personal loan to a home equity loan.


1. The most important factor for qualifying is creditworthiness


Because you are using your home as collateral, you may find it easier to get a home equity loan if you have poor credit. Personal loans place more emphasis on your credit score and debt-to-income ratio.

2. Higher rates are possible

Personal loans have higher interest rates because they are usually unsecured than HELOCs and home equity loans. The rate might not be affordable if your credit score is poor.

3. There will be no payment flexibility


Personal loans have a fixed repayment time and fixed interest rates. This means you will be stuck with the same monthly payment. A HELOC will allow you to be more flexible as most only require interest payments for the draw period.

4. Interest cannot be deducted from your tax returns

The best thing about using a HELOC or home equity loan for home improvement is the ability to get a mortgage.Add the interest you have paidIf you use the funds for home improvements, such as to build or remodel your home. A personal loan to pay for home improvement projects does not have any tax benefits.