How to Get a Home Improvement Loan Even If You Have Bad Credit

It can be difficult to get financing for home improvement loans when you have bad credit and the loans that you do qualify for often come with high interest rates. If your home improvement project can wait, you may be better holding off until you can improve your credit score. Sometimes, though, home improvement projects are necessary and you have to get a bit creative when looking for funding.

Difficulty: Moderately Challenging

Instructions

1. Determine how much money you will need for home improvements. If you have to hire a contractor, call a few to compare quotes. If the project is something that you can do yourself, search online to estimate the costs of materials. The total cost of the project can affect the options that are available to you.

2. Consider financing home improvements with credit cards. You may be able to use your credit cards to finance home improvement projects that are relatively inexpensive. Ask your credit card company to increase your credit limit if you find that you are a bit short.

3. Talk to your bank about of home equity line of credit. A home equity line of credit allows you to borrow against the equity that you have in your home. For example, if you've paid $40,000 of your mortgage, you may be able to get a line of credit for a certain percentage of that money. A line of credit differs from a loan in that you only take out what you need and only pay interest on the money that you use. Understand that if you do this, you are using your home as collateral and if you do not make good on your loan payments, however, the bank can take your home.

4. Ask someone to co-sign on your loan. Sometimes a bank will give you a loan if someone else agrees to co-sign to accept responsibility should you fail to pay. Ask a parent, a sibling or a friend if they will co-sign your loan.

5. Borrow money from family. A family member may be able to offer you a loan. They may still ask you to pay interest on the loan, but it will be lower than the interest you'd pay on a bank loan. Companies like Virgin Money act as the go-between in situations like this, making the loan legal.

6. Work on improving your credit score. With a low score, you end up paying higher interest rates than someone with good credit. If your credit score improves, you may be able to refinance your home improvement loan at a better interest rate.

7. Buy the best materials that you can afford. While it may seem better to take shortcuts to save money, using poor materials may mean that you'll have to replace it sooner, costing more money in the long run.

Resources

• Fix Your Credit in 37 Days