Unsecured Home Improvement Loan vs a Secured Home Improvement Loan

The two different types of loans for home improvement are the unsecured home improvement loan and a secured home improvement loan. An unsecured home improvement loan has nothing to do with your credit rating and lenders will not bother about what you have to offer as collateral. An unsecured home improvement loan is popular among those who have bad credit histories. Those with good credit history can also choose an unsecured home improvement loan without worrying about it affects their credit ratings.

Secured Home Improvement Loan

A secured loan as opposed to an unsecured home improvement loan is that which the lender gives you for some collateral. When you get a secured loan for a car, a home or home improvement, something of value is held as collateral until you are done repaying the debt including interest. You have to clear your loan irrespective of unforeseen circumstances or you will lose whatever you put up as collateral.

Unsecured Home Improvement Loan

An unsecured home improvement loan is good when you have small home repairs and home improvement jobs to finance, as they don't cost much and thus, you will be able to pay them off quickly. This is especially true if your expenses are below the $1,000 mark.

If you need financing for larger projects like roof replacement or adding a story to your home, then a secured loan would be a better idea than an unsecured home improvement loan. This is simply because the value you are adding to your home makes it more valuable and therefore better collateral. As opposed to an unsecured home improvement loan, a secured one generally comes with a lower rate of interest. This makes the long-term commitment to pay it off much easier than it would be for an unsecured home improvement loan. In addition, there are tax benefits that are associated with a secured loan that you will not get with an unsecured home improvement loan.

Although there are several categories of loans in the unsecured home improvement loan sector, the fact remains that the rate of interest applicable is almost always much higher. In addition, the amount you can borrow if you choose an unsecured home improvement loan is often lower than the amount you can borrow when you choose a secured loan.

When it comes to both a secured and an unsecured home improvement loan, there is some basic information you will be asked for. It includes your name, age, sex, residential address, driver's license number, social security number and bank details. You will not be asked for your credit history in the case of an unsecured home improvement loan, as it is taken for granted that you have the financial means to repay the loan.

Irrespective of whether you are applying for a secured or an unsecured home improvement loan, the bottom line remains that you have to repay it. The loan company may nag you more when you have an unsecured home improvement loan because you have not put up anything as collateral.