Whenever you need to finance a major investment, but you do not have enough money in your savings account, personal loans are the obvious solution.
However, they have a competitor in the face of home equity loans when it comes to financing home improvements. Let's take a look at the advantages and disadvantages of a personal credit program in such a situation.
With personal loans, borrowers do not have to place collateral. In this case, you will not have to place your house as collateral in order to finance improvements made to it.
Lower you risk
This is the major advantage of the personal credit products over their home equity counterparts. Basically, the risk for you will be much lower. However, the risk for the lender will be higher. Hence, you can expect a higher interest rate. You will pay more for the lower risk that you are assuming.
It is best to look at the type of home improvement that you would like to make and figure out how much it will cost in order to decide which type of loan to use. Small to medium repairs such as replacing damaged roof shingles, appliance upgrading, bathroom remodelling, living room furniture replacement and landscaping usually require a fairly small investment. Hence, they can be financed with a personal credit product.
There are various ways in which you can save when you finance home improvements with personal loans. The smaller the principle is the lower the interest will be. Hence, you should do the math to borrow no more than you need. More importantly, you should use comparison shopping to find the most affordable product. Do not miss to compare loans from smaller lenders as well as from major ones like Grindrod Bank, Capitec Bank and Absa Bank.