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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. More and more banks are becoming more flexible with what they take as collateral. As long as the item or items you are offering have some real value to them and can be easy liquidated (sold) then many banks, especially smaller community banks, will be willing to listen and work with you. Try to work with a company that specializes in what you’re offering to get the best deal. Pawn shops and eBay can get you quick cash for certain items, but you may not always be getting the highest value you can when you try those methods.

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.