Owning a home is certainly part of the so-called “American Dream,” but even if you own a home, and you have bad credit, you might be struggling.
People who don’t have credit issues seem to get loans with no issues, but if you aren’t one of those people and need a home improvement loan, is it hopeless?
No, it’s not, but there are some things that you need to keep in mind as you search for one.
Here are some tips if you want to get a home improvement loan with bad credit:
Improve Your Credit Score
By far, the easiest way to get a home improvement loan is to improve your credit score. Yes, it’s easier said than done, but sometimes, only a couple of points help.
It might be easier, for instance, to get a bad credit personal loan, use that to pay off your credit cards, and then apply for a home improvement loan. Then, you only have two payments to make and a credit report that shows that your credit cards are paid off.
Look for a Peer-to-Peer Lender
Instead of only focusing on a traditional lender for a home improvement loan, you can also consider peer-to-peer lending. What is it? It’s where an individual gives the loan instead of a bank.
You would have a contract with that lender, not the bank. Many large lending companies have areas on their websites that allow you to apply for this type of lending, even if you have bad credit.
If you have been in your home at least seven years, and you have equity in the home, you can talk to the bank about refinancing your mortgage. Often, even with bad credit, you have a better chance of getting approved for this than an actual loan.
Look Into Government Resources
The U.S. Government has programs available through the Department of Housing and Urban Development.
These programs allow certain individuals to apply for home improvement loans up to $35,000, but you must meet a number of requirements. However, credit doesn’t have as big of an impact on these resources.
Apply for Bad Credit Loans
There are definitely bad credit loans and lenders on the market. However, if you are going to use them, you have to know that you will pay a lot for the loan. It isn’t unusual for these rates to be well over 10%, and could even get close to 20%, where someone with good credit can get a loan with 0% to 5%. That’s a huge difference.
Barter or Exchange
Finally, depending on what you want the loan for, you might be able to barter or exchange with a friend or someone else you know.
For instance, if you know someone who works in home improvement and can help renovate your kitchen, ask if you can trade that work with car maintenance if you are a mechanic.
Of course, just make sure that it’s an even exchange.