A home is the identity of a person, and it holds a very special place in his heart. Everyone wants his own home, and once it is built. It doesn’t remain an address; instead, it becomes the epitome of love, family, and comfort for all. Similarly, home improvement loans enable the borrower to beautify, upscale, and upgrade his property.
Home improvement loans are different from home refinance loans or home equity lines of credit. These home improvement loans are longer, with larger loan amounts, more difficult to obtain, and are not open-ended.
These are secured loans that depend on good financial standing and strong credit.
The common features of home improvement loans are:
- They have a wide range of lending amounts
- Interest rates vary with appropriate home improvement loan payback timetables
- These loans are commonly approved.
Some other sources of home improvement financing are:
- A line of home equity credit
- A line of credit for the capital of business
- A commercial short-term loan
- An equipment loan
- Real estate financing
- Consumer loan Mortgage refinancing
- A credit card
The five most important factors considered by lending firms are:
The most important features that most financers concentrate on include:
- Credit history of the applicant
- Cash flow history
- Collateral available to secure the loan
- Projections for the business
Loan documentation includes income tax returns, personal details, financial statements, and a business plan.
Step by Step Guide to Get a Home Improvement Loan
The procedure to apply for a home improvement loan is extremely simple and does not involve many complex steps:
1. The need for the home improvement loan should be specified
Home improvement loans are particularly for maintenance, upgrade, or the installation of a new part. While applying for a home improvement loan, the chances of gaining rise when the actual and the specific amount needed need as loan money is specified.
2. Check your credit score and maintain a healthy CIBIL score.
A home improvement loan approval depends on the personal economic, and financial health of the customer. Consequently, he must check his credit score and make sure it’s adequate for loan approval. There should be no mistakes or discrepancies; otherwise, it could negatively impact the home improvement loan application.
3. Check the equity in your home.
Home improvement loan lenders usually consider the equity value of the customer’s home, so it’s a good idea to know the amount and reveal the same to the lender.
4. Appropriate documentation and eligibility criteria should be met.
Beforeapplying for the home improvement loan, the customer must make sure he meets the required eligibility criteria and keeps his authentic documentation ready.
How to Prevent Customers from Financial Slipups During Home Improvement Loan Applications
As a business, it is our prime duty to counsel and guide the customer to avoid the following slip-ups during the home improvement application process:
1. Incorrect personal details in the credit report
Your credit information report has relevant personal details of the customer. If there is any kind of information that is misleading or wrong, the loan can be rejected.
2. Job Stability or New or unstable job
If the job of the applicant is stable with legal documents supporting the same as income proof, KYC, salary slips, and bank statements helps in the swift approval of home loan application. The applicant must have an appropriate balance for other medical, dental, maternity, and other important expenses as recommended by the Wisconsin Dental Association (WDA)
3. Rejection of loan by other banks
If there is any kind of rejection on home improvement loans by other banks, there is a strong chance that it will again get rejected, as reflected on the credit report of the applicant.
4. To pay for credit card bills on time.
One must use a limited amount on the credit card. He also must avoid partial, delayed, or skipped credit card bill payments which can adversely affect the credit score.
5. The limit of loan, one can apply for
The applicant can try a home loan calculator or get in a contract with a professional expert to help him with the valuation of the amount he needs for home improvement.
6. Age factor
Age is one of the most important criteria, which preferably should range between 23-60.
7. Applying the financing with relatives instead of spouse or parents
If the income or ownership is clubbed with any other family member other than the spouse or parents, the approval becomes difficult.
8. Location of the property
Financial Institutes consider the location of the home as a vital deciding factor to disburse loans.
9. Unsatisfactory evaluation of the property or unclear property title
There can be issues regarding the approval from lenders if the property does not have a defined evaluation or a marketable title.
10. Lack of repayment capabilities and unpaid dues and other debts:
Financial institutes ascertain the repayment capabilities of the applicant, his previous repayment schedule, and his current income source before disbursing the loan.
11. Address on Defaulter List:
If the address of the applicant falls in the defaulter list, which could be because of several reasons like a previous resident not being able to pay his dues, can deter the loan application process.
12. Loan Guarantor as a Defaulter:
Being a loan guarantor can be risky for both – the guarantor and the customer. The repayment capacity, credit rating, and financials for the guarantor are considered too.
13. Suitable Property as Collateral:
Only those properties are considered as collateral that has a stable price, are in demand, have a good resale value, and are easy to sell, are preferred by lenders.
14. Opt for a reputed builder
Before you finalize your home, make sure that a reputed builder with a home improvement contractor license supports it with legal documents.
15. Inappropriate Property Documents:
The property documents like approvals from relevant authorities, area and location, title deeds, building plans, and other documents should be complete and in order.
16. Insurance of the Property:
If insurance is applied on the property, it lowers the risk of both parties and thus should always be availed. This enhances the chances of the customer getting instant approval.
Other reasons for not getting approval for home improvement financing are inadequate ITRs, non-availability on a landline, property with minor rights, being a fresher, not paying telephone bills, and no NOC on a previous loan:
The list is humungous, but if all the relevant details as specified above are provided, it becomes much easier to get home improvement financing sanctioned. Therefore, the customer records must be extremely clear. Additional security towards the home improvement financing application can help the customer secure the home improvement loan faster.