Improving your house can be a costly endeavor. Whether you’re painting a hallway or adding a room then you may need to borrow some money to get the job done right and in a timely and professional manner. The two different types of home improvement financing available are known as “secured” and “unsecured” loans.

Unsecured loans are loans which are given to you based on your credit rating and not based on any single thing you offer up for collateral. Your credit rating is really a measure of your historical ability to pay off what you’ve owed in the past. If you’ve always paid your bills on time then you probably have a pretty good credit rating. A credit card, even a credit card from a hardware store, is usually considered an unsecured type of financing. You generally don’t have to have equity to get an unsecured house improvement loan.

Hardware store credit cards are good to use for minor house improvement projects that are under $1,500 because the application process is usually fairly short. These credit cards are the most common types of unsecured loans for house improvements. You can sometimes qualify for a zero percent interest rate on some cards for three months.

Secure loans are loans in which the bank has some sort of collateral or item which they technically “own” until you pay it off. When you finance a car or buy a house with a mortgage the bank technically owns what you bought until you’ve paid off the debt amount with interest. With a secured house improvement loan your house is the collateral. If you default on your loan then the bank can take your house or car and sell it in an effort to regain some of the money they lent you.

Secured home improvement loans often have more paperwork but they also usually offer a lower interest rate because they are safer for lending companies to give out due to the collateral involved. You may even be able to deduct the home improvement loan interest amount from your yearly income taxes!

Whichever type of house improvement financing you consider remember that you do have to pay the money back and you will be paying interest on the money you borrowed. Be sure to thoroughly research all your financing options. Many home improvement plans are revised when people finally begin to understand how home improvement financing work.

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