How to Obtain a Home Improvement Loan

How to Obtain a Home Improvement Loan

After several years in your home, the question of home improvements is bound to come up. Sometimes it is due to necessary repairs and maintenance. For others, it is a great way to add value to your property. Unfortunately, these improvements often come with a steep price tag. If you are looking for ways to fund your projects, here is how to obtain a home improvement loan to help you update your house.

The Prep Work to Obtain a Home Improvement Loan

Before you set a meeting with a bank or lender, you should know what to expect. This includes knowing what questions they will ask and having the necessary documentation in hand.

The first thing any lender will do is run a credit check. You can do this beforehand by running a ‘soft’ credit check through Experian. If you know what your current score is, then you will have a better idea what loan options the bank or lender can offer you.

Next, the lender will ask for income verification to ensure you can repay the loan. So, take some time to prepare the documents like pay stubs, W-2s, or recent tax return for the self-employed. If you have an appraisal of your home and the projected cost of the project, it will also present you as a more favorable applicant.

Types of Home Improvement Loans

The scale and financial needs of your project will also affect which loans are available to you. Your financial health will also greatly affect the interest rates and terms offered. Here are the most common types of home improvement loans.

Unsecured Personal Loans

With an unsecured loan, you do not need to provide collateral to secure the loan. The interest rates the lender can offer you will depend on your credit score. However, once approved the funding comes quickly once you agree to the terms. Often times, you can have the money in your account within the same day. Unsecured home improvement loans usually have a shorter repayment period, lower amounts, and fewer fees than secured loans. However, they will also have higher rates, especially if you have a low credit score.

Home Equity Loans

This loan is more commonly referred to as a second mortgage because you are borrowing against the value of your home. The loan is paid as one lump sum that you repay over a longer period of time in fixed monthly installments. The benefit of getting this type of home improvement loan is that you never have to worry about market fluctuations affecting your interest rates. The greatest concern is that if you get too far behind in your payments, your home could be at risk for foreclosure.

Home Equity Lines of Credit (HELOC)

This secured loan is a popular option for home improvement projects because they usually offer lower interest rates than unsecured loans. A home equity line of credit, or HELOC, is a revolving credit which allows you to take money as needed. Although they provide greater flexibility, they are subject to variable interest rates. Furthermore, you must use your home as collateral meaning you could be in trouble if you are unable to make your monthly payments.

The Best Home Improvement Loan for You

Before undertaking any new renovation or maintenance projects, take stock of your financial situation. Ensure that you are ready to take on the responsibility of an additional monthly payment. If it is stretching your budget beyond your means, ask yourself just how necessary it is. Obtaining a home improvement loan is a huge financial commitment that may require you to borrow against the equity in your home. Take the time to consider all your loan and refinancing options. Choose the one best suited for your project and budget.

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The language of loans can sound a lot like foreign dialogue that can feel like it takes years to understand. How do you calculate the best interest rates or know if you can get a car on finance with insurance included? Most of us don’t really know where to start, but knowing the right tips and the right bank will have you riding off into the sunset in no time.

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Why Remittance Payments Have Dropped Worldwide

Remittance Payments Have Dropped Worldwide

In addition to the health concerns of the global pandemic, Covid-19 has had a huge impact on the world economy. Many countries have completely shut down all economic activities, therefore directly affecting its laborers and those dependent on them. Migrant and foreign workers are among the most vulnerable and have felt the sting of lost hours and wages. Furthermore, their families at home  also feel the affects since remittance payments have dropped worldwide. For those who are not supporting families outside the country, here are a few considerations of how this affects countries reliant upon foreign income.

Global Predictions for Remittance Payments

In poorer regions of the world, many people are dependent upon remittance payments from family members working abroad as a primary source of income. This money helps with daily living expenses, health care, education, and building a better future for their family. However, job losses due to Covid-19 are threatening many livelihoods.

Global remittance payments hit an all-time high in 2019 with an estimated $706 billion. Unfortunately, many foreign workers are employed in the service sector and not seen as essential employees. Furthermore, many of these workers are unable to return home due to travel restrictions. This means the steady cash flow has come to an abrupt halt. According to predictions from the World Bank, experts say this figure will drop by 20% this year. It is the most drastic decline in recent memory and is going to affect national economies in countries already struggling to cope with the pandemic.

Regions Where Remittance Payments Have Dropped

Even slight changes in policies have a huge impact over time. Keep in mind that many developing countries count on this income to sustain their economies. In the poorest countries, a few dollars a day can mean the difference between putting food on the table or going to bed hungry. For example, in countries like Nepal, Tonga and Haiti these remittance payments account for more than 29% of the national GDP. However, since the countries with the largest amount of outgoing cash are locked down,  remittance payments have dropped worldwide.

Although the average global decline is about 20%, Europe and Central Asia (27.5%), Sub-Saharan African (23.1%), and Southeast Asia (22.1%) will be hardest hit. The drop in remittance payments is especially worrisome for countries with large refugee populations. Lack of income could become disastrous in areas already suffering from shortages of food and medical supplies.

Personal Experiences of Sending Remittance Payments

I am among the fortunate foreign employees that have been minimally impacted by the economic downturn. Since Taiwan got a handle on the coronavirus early on, the country never went into a full lock-down. Schools and businesses shut down for two weeks following Chinese New Year, but economic activities quickly resumed. However, I did notice a few additional fees and forms each time I sent my remittance payments back to the US.

As it turns out, I am now facing a similar predicament as other migrant workers around the world. Circumstances are now bringing me back to the US with few job prospects. Those remittance payments have come to a complete halt. Therefore, my financial future relies on what I have managed to save and luck finding other revenue sources. Hopefully new banking policies and technology will offer easier access and fewer fees to send remittance payments. Many people’s lives may depend upon it.

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