Home improvement loans, a sub-type of personal loans, are meant for home expansion or enhancement works like new room, kitchen upgrades, bathroom fittings, new furniture, wooden floors, garden landscaping, etc. Choose from the following sub-types of home improvement loans:

  • Secured home improvement loan, designed for homeowners and property owners, is popular for its maximum benefits characteristics
  • Unsecured home improvement loan, designed for tenants, home owners, property owners and people living with their parents, like students, is popular for its ‘no collateral’ feature

A secured home improvement loan, as the name suggests, can be availed by offering collateral against the loan amount. The advantages of opting for this sub-type are – quick attention, high credit limit, competitive low APR, flexible payback terms and negotiable loan conditions.

However, a secured home improvement loan has one risk and one limitation. The risk is collateral seizure, i.e., in case of repeated defaults or non-payment, the lender gets the authority to sell the pledged asset to recover his investment. And, the limitation is slow approval process, i.e., the loan application is approved after time-consuming property evaluation along with other credibility factors.

For small home improvement works, pledging collateral does not seem practical. This is when an unsecured home improvement loan comes into the picture. This loan can be availed without offering collateral. The advantages of opting for this sub-type are – no collateral (no deposit against the loan amount), less paperwork (no red tape), quick service (fast loan processing) and no immediate risks in the event of repeated defaults or non-repayment.

However, an unsecured home improvement loan too has certain limitations – limited amount, high APR, fixed payback terms, non-negotiable loan clauses – because in the absence of collateral, the stakes are normally high for the lender.

As both secured and unsecured home improvement loans have pros and cons, planned approach is recommended.

Jake Nathan

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