If you’re looking to remodel your home but are short on cash, then one option that you can consider is getting an unsecured loan. An unsecured loan, also known as a personal loan, can be used for almost anything. As an unsecured loan, it doesn't add to your home debt for assessment purposes. However, before taking one out, there are a few things you should know. Continue reading to learn a few things you need to know about using an unsecured loan for a remodel.
How They Work
As mentioned before, unsecured loans can be used for just about anything. They function similar to other loans. You take out a certain amount of money, use it for its intended purpose and pay it off over time. When it comes to a remodeling job, unsecured loans don't require your house as collateral, differentiating them from other forms of financing such as a home equity line of credit (HELOC). However, the fixed rates of a personal loan depend on the lender and the current prime rate.
Just like with every other type of loan, you can’t just take one out. You must first qualify for one before you can obtain it. Luckily, qualifying for an unsecured loan isn’t very difficult. Before applying for this loan, make sure to check your credit score first. It’s worth mentioning that lenders won’t be very comfortable with giving a loan to someone with a low credit score. Don’t forget to acquire a copy of your credit report. Pay off any outstanding debt you may have and verify that you have a stable income. It’ll help to make the loan much easier.
How They Impact Your Credit Score
When taking out a personal loan, or any new loan for that matter, it’s crucial that you understand that it can have an impact on your credit score. This is because lenders will always pull your credit score when you apply. This is known as a hard inquiry. If your report is pulled, it will lower your score a little bit, but if your score is fine, then you have nothing to worry about.
With this knowledge, you’re ready to have your house remodeled with an unsecured loan. Just remember to keep information in mind when applying. Lastly, don’t forget to double-check if you have any outstanding bills or debt.