Our house is our fortress. It’s where we retreat to after a long tiring day. It’s the one place in the whole world where we feel most comfortable. Having said that, it’s just about right that we take good care of it. And the best way to take good care of it is through a home improvement loan.
The thing is, you don’t get a good home improvement loan willy-nilly. It takes time and a lot of thought to get one that would be a perfect match for your lifestyle. Here are some tips to get the home improvement loan that’s right for you.
Know What You Need
Before you do anything else, sit down and ask yourself these three questions: How much of my home do I need to get renovated? How much can I afford to borrow? And are there other financial benefits that I need? These questions will easily narrow down your choices and can prevent you from biting off more than you can chew.
Fixed vs. Variable vs. Split
To put it simply, the amount you have to repay for a variable rate loan can rise and fall depending on economic conditions. A fixed rate loan, on the other hand, will remain unchanged until the duration of the loan is done. A split rate loan, on the other hand, has some elements of a fixed rate loan and variable rate loan combined. It does not depend on the changes in the economy, but at the same time you can also take advantage of the rate fluctuations when the rates drop.
All of these have their pros and cons. To make a more educated decision, take the time to read about them below.
The Variable Rate Loan
The best thing about a variable rate loan is the freedom. It offers you the chance to pay earlier than expected, and you don’t have to pay a penalty for it. You can also decide to transfer to a different lender without having to pay loan-break costs. The downside is the cost of your loan is at the mercy of the near-unpredictable economic conditions.
The Fixed Rate Loan
With a fixed rate loan, you are already certain about the amount from the start. The downside is, it’s not as flexible as a Variable Rate Loan. If you decide to pay early or change lenders, you will have to pay loan-break costs.
The Split Rate Loan
The split rate loan only seems like the best of both worlds, but it’s far from perfect. For one thing, you won’t be allowed to make an early repayment. Since it is a combination of a variable rate loan and a fixed rate loan, some elements of it (The Variable Rate Loan) will allow you to lessen the rate of the loan through extra payments, other elements of it (The Fixed Rate Loan) will still charge penalties for early payment.
Now that you’ve read about the types of rate loans, take the time to process it first before deciding. What’s the best loan for you?