Unsecured Personal Loans vs. Secured Home Improvement Loans: What’s the Difference?

Unsecured Personal Loans For Home Improvement

What is it: it’s a loan priced and made solely on a lender’s assessment of a borrower’s ability to repay – property or collateral do not secure them. Because they are unsecured, lenders consider them riskier than secured loans; however, interest rates on unsecured personal loans are most often lower than credit card interest rates.

The money a borrower receives from an unsecured personal home improvement loan can be used for whatever the borrower chooses: general repairs, custom renovations, or new additions, – they’re flexible and easy to obtain. There is a variety of $100,000 principle and 5.99% interest rate unsecured personal loan programs on the market. Besides, there are no closing costs, and most lenders offer 3, 5, and 7-year terms.

Typical lender’s criteria for unsecured personal loan are:

  • Credit history and score
  • Current employment situation
  • Debt-to-income ration (how much of their net money income is being used to service debt)

Secured Home Improvement Loans

What is it: it’s a loan made with the lender’s condition the borrower puts his or her house up for collateral, so the lender can place a lean on its title to secure it for the loan. As a result, the borrower is unable to sell the property without first paying off the secured home improvement loan.

Every secured home improvement lender views property differently, and their lending criteria usually are:

  • Credit history and score
  • Current employment situation
  • Debt-to-income ration (how much of their net money income is being used to service debt)
  • An appraisal of the property
  • Necessary equity in the home

Usually, secured home improvement loans include closing costs the borrower must pay, and they take longer to fund then unsecured personal home improvement loans.