Home renovations have the power to bring a newfound sense of appreciation and joy to you and your family’s lives. Maybe you intend to scale up the master bathroom to create a luxury spa experience. Or perhaps you’re building a swimming pool for the whole family to enjoy in the summer. Not only do renovations spark exciting opportunities, but depending on the home improvement, you may also increase your house’s value, lower your utility bills, and save money on costly repairs down the line. But how do you pay for those improvements?
One way to make home renovations more budget-friendly is to use a personal loan from a credit union.
Benefits of Using Personal Loans from Credit Unions for Home Improvement
There are many ways to finance a home improvement project. In addition to personal loans, you can use home equity loans, Home Equity Lines of Credit (HELOCs), cash-out refinances, and credit cards.
However, personal loans—particularly ones provided by a credit union—offer some notable benefits:
- Affordability – Personal loans from credit unions often come with lower interest rates and fewer fees than traditional banks. That’s because big banks are focused on maximizing their profits, while credit unions are more concerned with enhancing the financial well-being of their members.
- Flexibility – A personal loan from a credit union means you may receive more flexible repayment terms than you’ll find at a big bank.
- Fast funds – Filling out a personal loan application only takes a few minutes. Once you submit your application, you can find out if you’re approved that same day. If you are, you’ll likely receive your funding in two to five business days, enabling you to get your renovations underway right away.
- Reasonable loan terms – Most lenders give you one to five years to pay back your personal loan. This gives you plenty of time to spread out your home improvement payments.
- Fixed interest rates – Unlike credit cards and HELOCs, personal loans come with fixed interest rates. As a result, your monthly payments will be the same amount each month.
- Set loan amounts – Personal loans typically come in amounts between $1,000 and $50,000. When you take out a personal loan for home improvements, you’ll receive the entire amount upfront. By capping your debt from the start, you can prevent yourself from going overboard on your renovations. In contrast, HELOCs and credit cards leave the door open for less restricted spending.
- Secured and unsecured options – Secured loans, such as home equity loans, cash-out refinances, and HELOCs, use your home as collateral. This means that you can lose your home through foreclosure if you don’t make their payments on time. If you don’t want to put your assets on the line to finance your home improvements, a personal loan may be the best option. Most personal loans are unsecured, which means they don’t require any collateral.
Types of Home Improvement Projects Covered by Credit Union Personal Loans
Another perk of personal loans is their usefulness across many purposes. For instance, you can use your personal loan money to pay for:
- Bathroom or kitchen remodels
- Floor or ceiling replacements
- Plumbing upgrades
- New appliances, windows, or doors
- Refreshed roofing
- Landscaping or sprinkler system updates
- Air conditioning installation
- Electrical wiring replacements
- Porch, patio, deck, or fencing installations
You can also use the remaining funds to pay for personal expenses outside the scope of your home improvement project, such as a big purchase, wedding, vacation, car repair, or medical expense.
Qualifying for Personal Loans for Home Improvement
Before you obtain a personal loan, you need to make sure you meet your lender’s requirements. While every lender’s eligibility criteria vary slightly, you generally need a:
- Credit score of at least 600 (some lenders require scores of 700+)
- Stable income and employment history
- Low debt-to-income ratio (ideally under 35%)
Additionally, it’s worth mentioning that credit unions typically have more lenient eligibility requirements than other types of lenders.
How to Apply for a Personal Loan for Home Improvement
Once you find a lender, you can apply for your home improvement loan. Just follow these steps:
- Estimate the total cost of your desired home improvements
- Gather the documents you’ll need to fill out the application:
- Proof of identity (your government-issued ID or passport)
- Proof of address (utility bills, mortgage statement, or property taxes)
- Proof of income (two years of pay stubs, tax returns, or bank statements)
- Your employer’s contact information
- Fill out a formal personal loan application with your lender for your desired loan amount
- Submit your application and wait for your approval letter
- Sign the closing documents and start making payments on your loan
How to Use Your Home Improvement Loan
Once you receive your home improvement loan, you can use it to pay your contractors and suppliers right away.
Here are some tips to make the most of your home improvement loan:
- Interview several contractors before selecting one
- Consider each contractor’s bid, communication quality, reputation, and reviews
- Set a clear budget for each project
- Agree on a realistic timeline
- Monitor your project’s progress and expenses throughout
As anyone who’s done home improvements knows too well, most projects end up taking longer and costing more than you originally expected. Thus, it’s a smart move to set some of your personal loan money aside to pay for unexpected expenses that arise along the way.
Tips for Successfully Repaying Your Credit Union Personal Loan
As soon as you receive your personal loan, you’ll need to start making its monthly payments. Here are some tips for paying it off successfully:
- Prioritize loan payments in your budget – It’s important to make your loan payments on time each month. In order to afford them, you may need to cut back on some of your discretionary spending. Fortunately, you’ll know exactly how much to cut back, since your loan payments will be the same amount each month.
- Set up automatic payments with your lender – Many lenders allow you to set up automatic payments, which authorize the lender to withdraw your loan payment each month on the same day. Autopay can ensure that you make all of your payments on time, preventing late fees and protecting your credit score.
Start on Your Personal Loan Process and Your Home Improvement
A personal loan for home improvement can help you transform your current house into the home of your dreams. By selecting a loan from a credit union, you’ll enjoy the additional benefits of affordable rates, flexible financing options, and superior customer service.
Ready to find a credit union near you? CUSelect is here to help.
