Home Improvement Loan Rates
Wondering how home improvement loan rates are calculated? Home improvement loan rates vary by lender and situation. You'll want to do the requisite research to make sure you get the best home improvement loan rates available for your situation.
The Nature of Home Improvement Loan Rates
Because these are unsecured loans, lenders are exceptionally cautious and may protect themselves by charging high home improvement loan rates. To put it simply, risk determines rates. If you look like you won't be able to pay back the loan, you will be charged higher rates, but if you look like a safe bet, you'll pay lower rates. Lenders look at the following factors when deciding how much of a loan to grant and what home improvement loan rates to charge.
How Your Cash Flow Affects Home Improvement Loan Rates
If you have a steady income and make a decent wage, lenders will be willing to take a bigger risk with you, especially if you have a solid employment history. Provide an accurate depiction of your income flow, including side jobs and extra sources of income. More income makes you a safer client, garnering you lower home improvement loan rates.
How Your Credit History Affects Home Improvement Loan Rates
Potential lenders will examine your credit history, looking for red flags such as defaults, late payments, settlements and evictions. You will want to check your credit report occasionally to make sure you are accurately represented. Some things that can bring down your credit score are: credit information that belongs to another person who shares your name, the after-effects of divorce from a person who has bad credit, or the results of identity theft. Today now then ever credit fraud is a problem and many people may go to get a home improvement loan only to find out that they have been a victim of credit fraud and no longer qualify for a loan. When and if this happens it is important to immediately contact the credit reporting agencies to begin the long process of credit repair.
Here is a list of helpful links if you have been a victim of credit fraud or identification theft:
Federal Trade Commission Identity Theft Site
TransUnion Fraud and Identity Theft Information
How Your Assets Affect Home Improvement Loan Rates
Some lenders will also take into account your overall assets such as homes, land, automobiles and investments. Your overall assets factor into the home improvement loan rates because a person who has assets to sell off or tap into will be more likely to be able to pay off a loan. If you do not have assets available, the lender fears that if you lose your stream of income, you have nothing else to turn to use to make payments on your loan.
How Your Income to Debt Ratio Affects Home Improvement Loan Rates
Lenders also take into consideration how much you make in relation to how much you owe. You may have great credit, a steady income, and plenty of investments, but if you are carrying a significant amount of debt—let's say, for example, two mortgages because you bought a second house with the intention of flipping it, but have not been able to sell it or get a renter—you may be denied a loan or charged higher home improvement loan rates.
Now that you know what determines home improvement loan rates, you can take steps to make yourself the most appealing borrower possible, increasing your chances of getting lower home improvement loan rates.