Home Improvement Loans and Financing

As we all know, the housing bubble has popped. This has put a strain on people who were hoping to use the increased monetary value of their homes to perform some much needed home upgrades. The crash in home values across the nation means there are many people who are now living in homes that have not built up any added value over the past couple years.

In a rising housing market you can buy a house value one year and in the next year the value of the home will actually increase by a few percentage points from one year to the next. You would then be able to borrow money against that added value from a lending institution and use that money for a big home repair project. So if you bought a home for $175,000 a few years ago it might actually be worth $185,000 today with normal economic growth.

These days many home prices have actually dropped in the past year or so, which means a lot of people are now paying for homes that are now worth less than what they originally paid. When you owe more cash on a house than what it is valued at then you are said to be “underwater” with your mortgage payments. This means they don’t have that extra home value which is known as “equity.”

If you’re searching for a big home remodeling loan then you may want to think about applying for an FHA home improvement loan from an eligible loan partner. There are lots of sellers of these kinds of loans, they offer a low interest rate and you can be eligible to pay it off over a generous 15 years. Just about any one who owns a home can apply for an FHA loan and eligibility is less restrictive than most traditional lending institution loans. You do not have to have equity in your home to apply for a Title I home improvement loan.

LendingClub is a peer-to-peer service that offers personal loan rates that are much lower than a bank. You can create a free account to learn more!

If an FHA loan isn’t going to work for you and your credit is still decent, try an online home improvement loan from a financial institution like the LendingClub. They offer personal loans that have a much lower interest rate than a bank, they are one of the few growing financial organizations out there, and they are community-based, so its really a lot of people helping each other.

Another great way to keep the costs of a home upgrade project down is to do at least some of the labor yourself. There are lots of easy DIY home improvement jobs most people can do around their homes with just a little bit of know-how and some elbow grease. For many home improvement jobs the highest expense often comes from the amount of manual work involved, so by doing some of that work yourself, you can really reduce the total cost of the overall job.

Most manageable house repairs can become major headaches if they are allowed to go unaddressed for too long. If you have a serious house repair that needs to be done, don’t let your home’s dropping value prevent you from getting the money you need to make the repairs. And, as expected, big home improvements always end up costing more than the small ones.

If you’re looking to finance a home improvement this year, there’s still a good chance that you’ll be able to get the loan you need as long as you don’t rely on the more traditional forms of home improvement loans.

First, banks are still being very conservative about lending any money at all and since most banks specialize in secured home improvement loans, the news isn’t good. Housing prices are still dropping and leaving many homeowners without enough equity to take out the traditional Home Equity Loan or Home Equity Line of Credit (HELOC). That means that banks aren’t going to be jumping up and down to hand out money.

Another whammy for people wanting home equity loans is the rising bank interest rates. The interest rates on most bank loans are still much lower than they’ve been in the past, but they’re starting to creep up, which means there will likely be even less home improvement financing though traditional bank loans in the upcoming months.

This does not mean, however, that home improvement across the nation has come to a standstill. Both large national home improvement stores The Home Depot and Lowe’s have recently stated that their outlook for the rest of the year is not quite as bad as they originally expected. Both home improvement stores are limiting expansion, trying to improve the customer experience and aiming to cut costs.

While large home improvement projects are still being delayed due to a lack of equity and the inability to take out a large home improvement loan, smaller home improvement projects, many that may require an unsecured home improvement loan, are still popular because there are so many people choosing to stay and improve their own homes rather than selling and moving to a new house. It doesn’t hurt that The Home Depot offers several low interest home improvement credit cards and Lowe’s offers their own home improvement credit options to entice customers into their own stores.

While banks may not be lending money for home improvements very readily, there are some alternative options. You may qualify for a Title 1 FHA home improvement loan depending upon your situation or, if you’ve got a small home repair or upgrade project you can try getting an online home improvement loan through the Lending Club. They offer rates better than most banks, but you do need to have a decent credit score.

Don’t shy away from doing home improvements if you can actually afford to do them. Most home improvements, even minor ones, can increase the value and pleasure you get from living in your house. When housing prices begin to rise again (and, don’t worry, they will) then you’re home’s value will rise faster than comparable homes in your area without those improvements.

There’s a lot of confusion about Title I home improvement loans and what they really are, which is a shame because they’re one of the best forms of home improvement financing available. Did you know you could borrow up to $25,000 for under $200 a month…even if you don’t have no equity built up in your home?

There are misconceptions about how Title I loans for home improvements work and even what they can be used for. In this article we’re going to try to cover some of the more common questions about this home improvement loan program.

What is a Title I Home Improvement Loan?

The US Department of Housing and Urban Development (HUD) has created a home improvement loan program through the Federal Housing Administration (FHA) that can help homeowners fix up their homes, perform repairs on their house or even build on additions or non-residential buildings (such as a shed) on a piece of property that they own. The borrower must have a good credit history and be able to pay back the loan with monthly payments.

It’s important to note that an FHA Title I home improvement loan is not actually a loan or a grant directly from the government. Rather, HUD insures private lenders against the losses of these loans, which makes more local private lenders willing to give out these loans to homeowners. That means that when you apply for a Title I home improvement loan you’re actually applying for a loan through a private lending institution and not through HUD or the FHA.

Many local banks, credit unions, mortgage companies and other lending institutions are actually Title I lenders and you’ll still want to shop around with each to get the best loan for you. Even trustworthy online lending institutions like offer competitive FHA Title I Home Improvement Loans.

What kind of home improvements are covered with Title I Home Improvement Loans?

The home improvement project can be as small as adding some extra insulation to the attic to larger home projects such as replacing a roof, remodeling a kitchen, adding a bathroom, buying a new furnace or constructing a new room on your house. Single family Title I home improvement loans must be used to pay for structural or site changes, repairs or additions and cannot be used for luxury or extraneous items like swimming pools, hot tubs, barbecue pits or interior decorating. The improvements must also be part of the permanent structure and cannot be temporary in nature.

Multifamily structure home improvement loans can only be used for alterations and repairs.

What are the borrowing terms of a Title I Home Improvement Loan?

Here are he maximum home improvement loan amount and loan terms are based on the type of structure you’re improving:

The interest rate of FHA Title I home improvement loans can vary from one location to another and even from one loan lender to another. The interest rate is usually a fixed rate that is mostly based on national loan interest rates at the time.

Want to really see the benefit of a Title I home improvement loan? If you were eligible to borrow that maximum of $25,000 with a 20 year term and an annual rate of 6% (that’s about the average loan rate these days) then your monthly payments would be a measly $179.11! That’s an incredible deal and it’s unlikely to be matched by any traditional home improvement loan or credit card offer!

What makes an FHA Title I Home Improvement Loan different from traditional home improvement loans?

First, no equity is required to apply for a Title I home improvement loan.

Second, the amount of money you can borrow can be dictated by the estimated value of your home after the improvements are done. This is especially helpful if you don’t have any equity in your home at the moment, but need to complete some home improvements to increase the value of your home.

Third, there are lower closer costs due to the lack of a need for an appraisal and the qualifications for applying for an FHA Title 1 loan are often less restrictive than conventional home improvement loans.

Forth, while most home improvement loans have a short loan term of only five years, an FHA Title 1 Home Improvement loan can have a repayment plan of up to 20 years with no penalty for paying the loan off early.

Are there any other eligibility restrictions for a Title 1 Home Improvement Loan?

There are only a few real restrictions beyond those listed above. If you’re in a “new construction” home then you have to have lived in the home for more than 90 days. Loan amounts over $7,500 are secured against the mortgage or deed of the property you are improving.

The bottom line: if you’re looking for a low interest home improvement loan that doesn’t require home equity, consider learning more or applying for an FHA Title I home improvement loan. Ready to get started? .

There are lots of different ways to pay for home improvements, but some methods are more conventional than others. When most people think about financing their home improvements they often consider traditional means of borrowing money such as going to a bank for a secured home improvement loan or using a low interest home improvement credit card.

If, however, your financial situation doesn’t allow you to apply for those sorts of loans, and your home needs some sort of repair to keep it safe then you may want to consider a “good neighbor” home improvement loan.

Neighborhood loans for home improvements have been becoming more common as home prices fall people have lost most of the equity they have in their homes. The concept is simple: people helping people fix up their homes, either with direct help or by providing indirect support such as food or something else for trade.

Here’s a practical example of how a neighborhood home improvement loan would work: Let’s say you’re an elderly woman who needs to repair a leaky roof and maybe have some of your front landscaping thinned out. Instead of going to a bank or lending institution to try to borrow the thousands of dollars needed for these home improvements you could turn to some neighbors who may know how to repair the shingles on a roof and some able bodies who can tear out some bushes. In return for this service you might be able to offer some home cooked meals, knit a blanket or afghan or even offer to do some home cleaning for the people who are offering to help you.

If you don’t have any neighbors with the skills needed to improve your home, there is another way you can still finance your home improvements. You can offer to take out a personal loan from your neighbors and in return you can pay back the loan at a small interest rate, much lower than what a bank might charge. In this situation your neighbors get to make a little extra money with the interest charged and you get to improve your home at a much cheaper rate than what a traditional lending institution might charge. To be sure everything stays friendly, you should definitely speak with an attorney and probably have a written agreement drawn up.

This neighborhood home improvement loan is simply a smaller, and more local, version of what Lending Club is actually doing : sign up is free and easy, loan applications are quick and online and the interest rates are lower than most banks. You can read more about using LendingClub.com for a home improvement loan and see if the it’s for you. It’s essentially an internet version of a neighborhood loan. It’s people lending money to other people at a low interest rate.

Of course, when everyone in a neighborhood pitches in an helps another neighbor improve his or her home, everyong benefits. The nicer and more updated each home in the neighborhood is, the more everyone’s home is worth. By raising the value of one home, you in effect increase the value of all homes in the entire neighborhood. So loaning your neighbor help or money to update his or her home is actually like giving yourself a loan as well!

How would you instead like to get a personal loan for home improvement at low interest rate (possibly below 8%!) with an easy online application and quick approval turn around? You can actually get exactly that through the acclaimed and award-winning online loan service called Lending Club.

Maybe you don’t have any equity built up in your home or maybe you simply want an unsecured loan for some home improvements. You could go to a bank and look into their home improvement financing options, but a lot of banks are tightening their belts and simply not loaning money out the way they use to. If you did actually get approved for a home improvement loan from your local bank you might expect to pay an interest rate of anywhere between 11% up to over 18%, depending upon the lending institution.

Lending Club gives out loans for any amount between $1,000 to $25,000 and you will have a fixed rate for as low as 7.88% currently. All the loans are three year installment loan and your interest rate will ultimately be set based on a number of different factors in your credit report.

Lending Club turns the loan process into what it should be: people helping people. The site joins together people who want to loan money with people who want to borrow money, but it does so in a clever way to minimize risk to lenders and to give borrowers money fairly quickly and at a lower rate that almost any bank out there. It’s also very secure and your identity is always protected. You can borrow money for home improvements or just about anything else you want. They give out all sorts of personal loans including debt consolidation loans, home improvement loans, apartment rental loans and even education loans.

To get these low rate loans, you need to have a pretty decent credit score. If you’re not sure what your credit score is or you think you may not qualify you may want to read about how to get a home improvement loan when you have poor credit. Borrowing money is really easy with Lending Club. You just need to follow these four simple steps:

1. Join Lending Club for free! You just setup free a username and password to join the site and find out more information about exactly what you qualify for.

2. Once you’ve joined you’ll want to poke around and check out the details of what they offer. When you want to fill out a loan application, you simply click on the “Borrow” tab and then click on the “Get a Loan” link near the top of the page. All you do now is fill out the loan application online. It asks for some basic financial information and verifies your identification and a valid bank account.

3. Once Lending Club approves your application your anonymous information will be given a letter grade from A to G and will able to be browsed by lenders. All your personal information is completely confidential and secure. When a lender wants to let you borrow money he or she will simply choose to fund it in increments as small as $25. You’ll probably end up having lots of lenders, but don’t worry, you still will pay back the loan with just one payment to LendingClub per month. Once your entire loan amount has been funded you’ll get your money in a day or so via electronic transfer!

4. You have your money, so go fix up your dream home! In the mean time LendingClub will automatically withdraw your payments from your validated bank account every month on the exact same day, so you won’t get caught by surprise or have to worry about sending in your payments late. It’s all done automatically for your convenience!

How can they offer loan rates so much lower than banks? They’re a company that deals exclusively with online transactions, so they don’t have a lot of overhead caused by slow paperwork (it’s all computerized!) or paying for parking spaces and store front rent (they just need a website). It’s a streamlined loan process in which everyone wins!

So if you’re looking for a low rate home improvement loan with reasonable terms then you’ve got nothing to lose by joining Lending Club for free and checking it out!

You may be able to reduce your income taxes by taking out a loan to cover some much needed home improvements. Not all home improvements qualify for a tax deduction or tax credit, but in certain kinds of home improvements can decrease your taxes not just for the calendar year in which you finish the project, but also for years to come.

If you are required to perform a home improvement project or remodel part of your home to accommodate a medical condition then all or part of the cost of that project may serve as a tax deduction, which means you can reduce that amount from your taxable income for the year. If, for example, someone in your home is suddenly confined to a wheelchair you may be able to deduct the amount it takes to install an elevator, lower kitchen cabinets or simply widen doorways in your home.

Likewise, the latest Stimulus Package has added tax credits to the 2009 and 2010 calendar years for certain energy saving home improvements including installing new energy efficient windows, doors, certain types of roofs, heating and air conditioning units. You can use up to 30% of the cost of any project as a tax credit, with a total of up to $1,500. For example, installing $6,000 worth of solar panels on your home may qualify you for the maximum $1,500 tax credit at the end of the year. In addition, some states and even some utility companies offer additional money-saving and tax incentives for making your home more energy efficient.

Obviously, not all home improvements are eligible for a tax deduction. You should talk to an income tax professional or research some of the details surrounding home improvement tax deductions before you embark on any home upgrade or remodeling project.

You obviously may not be able to afford all of these projects without borrowing some money, but even certain home improvement loans can lower your taxes if the money is borrowed against the mortgage or equity in your home. If you take out a home equity loan specifically for home improvements you can often use the interest you pay on the loan as a tax deduction. This is an option that is available with only certain types of home improvement loans. Each year the loan is open and you pay interest on the loan is another year you can deduct that interest amount from your taxable income in some cases.

Again, before you perform any home improvement or apply for any type of home improvement loan for tax reasons you should definitely speak with a qualified tax accountant to make sure your home improvement plans and loans are going to follow the letter of the law and be eligible for the greatest tax deductions or tax credits.

When you’re applying for almost any type of home improvement loan you’re eventually faced with the question of whether the loan will be a fixed rate loan or whether the interest rate charged will be variable.  The difference between the two types of loans could save you hundreds, if not thousands, of dollars over the life of your home improvement loan.

Let’s first talk about how a typical home improvement loan from a bank or lending institution works.  Let’s say you borrow $10,000 to build a new deck on your home.  You pay back the loan over time, but you also pay a little extra money, called interest, that is agreed upon when the loan is signed.  This interest is essentially the profit that the bank makes for loaning the money to you.  If you borrow $10,000 and agree to pay it back over 5 years (plus interest) then at the end of those five years you may actually have paid $13,000 or more.  Sometimes the rate of interest through the life of the loan stays the same, but sometimes that rate goes up or down and can dramatically affect your monthly payment.

Fixed Rate Home Improvement Loans: When interest rates are low it’s often smart to go with a fixed rate loan because the chances of the rate going up are greater than the changes of them going down.  Lower interest rates mean you can borrow more money and pay less interest, which is obviously a good thing for consumers who want a cheap home improvement loan.  Fixed rate home improvement loans are usually designed so that every monthly payment is exactly the same through the life of the loan.  This is good because it means there won’t be any surprises.  The rate you can get on a fixed rate home improvement loan is often based on your past credit history, whether it’s a secured or unsecured loan and the amount of the loan and payment length.

Variable Rate Home Improvement Loans: Some home improvement loans can have a variable rate of interest which means the interest rate of the loan changes as interest rates in the market place go up and down.  Banks generally like variable interest rate loans because there’s always the chance that interest rates will go up, increasing their profits and your payments on the loan.  So why would you choose a variable rate loan at all?  Banks will often offer a slightly lower rate to entice customers to use them.  Variable rate home improvement loans are often still good loans and can be great ways to fix up your home.  Sometimes a variable rate loan will actually cost much less than a fixed rate loan if the interest rates go down over the life of the loan.

While different home improvement loans offer different payment terms you can sometimes even refinance a home improvement loan if you find the payment terms to be not to your liking.  Whether you get a fixed rate or variable rate home improvement loan is a completely personal choice that depends upon the market conditions of tha time, your individual loan needs and your personal credit history.

Using a credit card to pay for a home remodel, repair or upgrade is one of the easiest and quickest ways to get a home improvement loan, but it’s not always easy picking out the best home improvement credit card for you. There are lots of credit cards available that are specifically geared towards home improvements, but it’s sometimes difficult to decide which credit card is the best one to you for your particular home project or even if you should use a credit card at all.

The advantages to using a home improvement credit card are usually pretty obvious: you usually can get credit card points or special financing rates for using your credit card on certain types of home improvement purchases, including home appliances, tools, materials and more.  And you can often get a credit card with an initial interest rate of around 7 or 8% depending on your credit history. With a home improvement credit card you usually have a fixed credit limit like $5,000 but you don’t have to use that entire amount of money.  You can only charge what you need at the time and then pay off that amount, leaving the credit card open for other home improvements down the line.

When you go looking for a home improvement credit card online you’ll immediately notice that a lot of sites try to sell you a card right there or promote a certain card that they get a commission on.  Instead of doing that we’re going to give tell you about the things you should consider when you are looking at home improvement credit cards.  Ultimately the best home improvement credit card for you is the one that fits your individual situation and needs.  Here are the different types of home improvement credit cards available in no particular order:

Home Improvement Reward or Points Credit Cards: There are lots of these “rewards” credit cards available from thousands of different banks.  They generally work in one of two ways.  They either give you credit card “points” which can be redeemed for home improvement items such as appliances or home contractor services or they give you special rates and incentives to use the card for home improvement projects and purchases.  Most bank home improvement cards do a mix of both.  Most bank home improvement credit cards are ultimately just Visa or MasterCard cards that can really be used anywhere and not just at home improvement or hardware stores.  These reward cards can be good for home improvements, but you have to read the fine print to see what sort of fees are involved, whether or not the points “expire” after a certain period of time and what the rate of point accrual really is.  If you need to spend $5,000 to receive a $10 gift certificate then that home improvement credit card is hardly worth it.

You also have to be careful to pick a rewards card that has rewards you actually want.  I have a neighbor who signed up for a GM Rewards card thinking that he’d remodel his kitchen with the credit card and then use the points to get a discount on a new truck.  After his kitchen was done being upgraded he want truck shopping and ended up buying… A used Chrysler PT Cruiser! All those GM points went to waste because he was tied into those points and ultimately didn’t want to use them.  Most reward credit cards now have multiple options for rewards so you can still get gift certificates and travel bonuses even if that’s not your primary reward point system.  A rewards card could be the best home improvement credit card for you if your project is big enough to earn points and rewards that you know you will use.

A Money Back Credit Card: Some credit card, like the Discover Card, will actually send you a check for a percentage of the money you spent in a certain time period. These are good cards if you know you’re going to use your credit card for a home improvement project and don’t want to bother accumulating points or worrying about whether or not you’ll be able to actually use your reward in the future. Most money back credit cards send you money either when your rebate hits a certain limit or after a specified period of time. The percentage you get back can also vary based on what you purchase. Some credit cards give you more money back for buying things like auto supplies, gas, groceries or other items with it. A cash back amount of 1% or 2% is usually pretty good for these money back credit cards. It may not sound like much, but it adds up quickly!

A Home Depot Credit Card: If you happen to have a Home Depot nearby that you can use for your home improvement, then this might be a better choice than a rewards card because you may save more money in the end.  The Home Depot offers a lot of different home contractor services, so you may be able to actually have someone come in and do all the work and buy all the materials from The Home Depot. The Home Depot card is a popular home improvement credit card because they have a zero interest and no payments policy for six months on purchases of $299 or more.  You just use the The Home Depot credit card for your entire home improvement or remodelling project and then pay the balance off as you see fit.  This could be the best home improvement credit card for you if you think you’ll be able to pay off most of the balance in six months and like the idea of getting an interest-free home improvement loan during that time.

A Lowe’s Home Improvement Store Credit Card: If you typically shop at the Lowe’s Home Improvement Store chain rather than The Home Depot then you may want to consider several different credit card options from Lowe’s.  They have a regular consumer Lowe’s credit card as well as a Lowe’s Project credit card.  Each are aimed towards home improvement purchases for the consumer, but they have different payment terms and options, including a six month no interest option just like the Home Depot card.  Like the Home Depot, Lowe’s offers a number of home improvement and remodeling contractor services as well as home improvement materials and tools.  A credit card from Lowe’s may be the best option for you if you have a Lowe’s nearby and you plan to do most of your home upgrade purchases there.

Other Home Improvement or Hardware Store Credit Cards: Lowe’s Hardware Store and The Home Depot are obviously not the only home improvement and hardware stores in town.  Many smaller hardware store chains offer their own credit cards and home improvement financing plans that can be just as competitive as the big stores.  Some smaller home improvement store credit cards offer very low rates with longer zero interest payment terms.  I’ve seen small hardware store chains offer 10%-20% off large purchases just for using their home improvement credit cards.  Deals like this are not uncommon because it helps the smaller hardware and home improvement stores undercut the larger chains and bring in more business.  If you’re going to use a small local store or if you can get some decent deals at a chain hardware store in your area then a home improvement credit card from that hardware store chain may be your best option.

Obviously knowing how much your home improvement will cost and where you’re going to purchase most of the materials and labor from will be very helpful.  I strongly suggest going to different stores and getting free quotes on your home improvement project before applying for any specific home improvement credit card.

A home improvement credit card is essentially an unsecured loan that’s easy to use for home repairs and improvements where you don’t know exactly how much money you’ll need.  If you have good credit and you’re looking for a home improvement loan of a specific amount, then you might want to try a low rate Lending Club home improvement loan.

It’s a quick and easy loan service that can get you the money you need quickly and easily. They’re free to join and have an online application, so you don’t have anything to lose.  They’re a safe and secure company to deal with and they’ve won a lot of rewards for their loan service. If you want more information you can read our mini review of Lending Club.

Now you know what to consider when looking for the best home improvement credit for your situation.  You can now weigh the pros and cons and ultimately feel confident when you fill out that credit card application that you are getting the best home improvement credit card for you!

It is estimated that over 70% of all Americans get an income tax refund each year due to overpaying their income taxes on salaries, paychecks and other forms of income throughout the calendar year, and that money can go a long way towards paying off any existing home improvement loans you may have. And while loaning the government extra money is generally not a great way to get rich, there is an undeniable feeling of satisfaction in getting a large tax-free check from the government each spring!

One of the best ways to use that money effectively is to pay down an outstanding home improvement loan that you may have opened in the previous year.  Here’s how this might work:

Let’s say in 2008 you applied for a home equity loan to perform add an addition on your house or to improve your home.  For the sake of argument we’ll say that you took out a $10,000 home improvement loan in early 2008.  This home upgrade will probably increase the value of your home which may allow you to borrow money for more home improvements in the future.

As the work on your home progresses and as you pay off your loan you are also paying some interest on the monthly loan payment.  The interest might be around 6%.  The interest that you pay on your home improvement loan in 2008 can often be used as a deduction on your 2008 income tax.  So if you paid $500 in interest then in many cases you can deduct that from your gross 2008 income, which ultimately means you get a larger tax refund for 2008.

In 2009 you can then use your income tax refund to help pay down your home improvement loan, effectively getting rid of some of your debt.  By taking out a loan for a home improvement in one year and using the tax refund from the next year to help pay it off you can sometimes afford to continually be improving your home while reducing the income taxes you owe and increasing the equity in your home.

Most home improvements cannot be used as a tax credit, but there are some exceptions to this, especially when it comes to home upgrades that are needed for a medical condition or for special energy saving home improvement project.  Generally the interest paid on a home improvement loan or line of credit can be deducted from your income for tax purposes as long as the money is indeed used to improve your house.

Obviously, every tax and income situation is different and you may want to consult with a qualified tax professional to make sure this method of paying down home improvement loans will work for you.

If you don’t have any equity or extra value in your home, but you need to upgrade or perform some improvements around your house, then you may be able to get a no equity improvement loan from a number of different sources.

These no equity home improvement loans are a growing segment of the loan market ever since housing prices started to tumble.  First, lets explain how equity and home improvement loans work.

Let’s say you bought your home two years ago for $250,000.  You’ve paid off $10,000 worth of the mortgage, which means you only owe $240,000 at the moment.  If the value of your home remained at $250,000 then you would have $10,000 in equity.  If the value of your home rose to $260,000 then you would have $20,000 in equity.  The problem facing a lot of people is that their home values actually went down instead of up with this economic recession, causing people to lose all their equity.  Many people actually ended up “upside down” in their mortgage where they owe more on their mortgage than their house is worth.  These people have no equity to secure an improvement loan.

Most people who have been in their homes for a couple years start noticing things that need improving or upgrading as time goes on.  Roofs get old and leak, siding needs to be upgraded, windows and doors need to be replaced, furnaces break and there are hundreds of others expensive repairs and improvements than can require a home improvement loan to pay for even if you don’t have any equity in your house.

Traditionally the equity in your home served as the collateral to getting a home improvement loan.  This is called a secure home improvement loan, which is different from an unsecured home improvement loan.  If you don’t have any equity in your home, then you can get a no equity improvement loan through one of these other means:

Apply For an FHA Loan: FHA (Federal Housing Administration) loans are government backed loans (given out by banks and mortgage lenders) that are designed to help people obtain a mortgage that they wouldn’t normally be able to afford.  There are even some new FHA programs like the FHA-Secure program that was implemented in 2007 to help people who have been hurt by the housing crisis and there are even FHA Title I loans specifically designed for home improvements.  An FHA loan can replace an existing mortgage that will allow you to consolidate bills without requiring additional equity.  There are some rules you need to qualify, but the best way to find out if you’re eligible is to fill out an application and work with a home loan company you’ve heard of before.

Offer Collateral In Place of Home Equity: If you want to get a secured loan then you can offer something to the bank that has value if you default on the loan.  It could be a boat or a car or even some sort of antique or other valuable piece of merchandise that you don’t want to sell, but could be used to secure your improvement loan.

Consider A Home Improvement Credit Card: If you’re the do-it-yourself type or if you know you can pay for the service through a hardware and home improvement store like the Home Depot or Lowe’s Home Improvement stores, then consider a home improvement credit card.  No home equity is needed and there are lots of different payment options and cards available.  There are a number of low interest credit cards from Lowe’s and you can even get an interest free credit card from The Home Depot.

Try A No Equity Improvement Loan from a Local Bank: Many local banks, unlike large national banks, are still doing well and lending money to loyal customers without many issues.  If you’re going to work with your local bank, then you’ll need to do your homework and be prepared to show that your home still has value even if there isn’t much equity in it.  You can follow these tips for getting a home improvement loan from a bank.

These are all valid options and ways you can easily apply for and obtain a no equity improvement loan.

You may also want to read our Home Improvement Loan Primer if you’re unfamiliar with how different types of improvement loans work or if you’re not sure about how you could really qualify for an improvement loan with no equity.