Home equity loans are a second mortgage on your home. They're usually a fixed interest rate for the life of the loan, and you get the money in one lump sum. Terms vary, but many home equity loans have you pay back the principle and interest within 15 years with monthly payment plans. This might be the best option if you need a set amount of money for something important and have enough room in your budget to make the payments, of course.
If you’re planning to refinance, a remodeling loan may make it more difficult. When you refinance, the lender holding your home improvement loan must agree to "resubordinate" the loan, or “agree to sign off and say they’ll stay second in line,” McBride said. While this is often a formality, he said, if you are in default on your home improvement loan, “the lender may use it as leverage.”

Because terms and rates differ greatly between these niche loan products, it's also harder to understand just what you're signing up for. Steer clear of shady offers, especially payday loans. You should compare the terms, APR (annual percentage rate), and other costs of each loan to see which one makes the most sense. The Mortgage Professor offers many calculators for that tricky task.
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Home improvement projects—whether you hire a pro or DIY—do cost a pretty penny, so most of us have to take out some sort of loan to pay for them. You've probably received "you've been approved for a personal loan!" letters in the mail or have been told you can refinance your mortgage and take money out for whatever you want. As with other major financial decisions, however, it's really worth the time to understand your different choices so you don't screw yourself in the long run. Let's take a look.
There are many ways to pay for home improvements, from traditional home improvement loans to personal loans to home equity lines of credit to government programs to credit cards. Regardless of which type of loan you’re considering and what type of lender you want to work with, shopping around will help you make sure that you’re getting the best rate and terms on your home improvement loan. If you apply with several lenders within a short period, the impact on your credit score will be minimal. (For more, see The 5 Biggest Factors That Affect Your Credit, An Introduction to the FHA 203(k) Loan and Applying for an FHA 203(k) Loan.)
SoFi is known for student loan refinancing, but the online lender also offers personal loans for house remodeling. You can borrow as little as $5,000 or as much as $100,000 and repay it over two to seven years. SoFi loans also come without origination fees and prepayment penalties. They even have an unemployment protection program that can temporarily pause your payments if you lose your job.
If you tend to have trouble getting out of debt, keeping your finances organized or meeting deadlines, this isn’t a good option for you. Borrowers who are disciplined, detail oriented and spend within their means could find this to be the least expensive option. However, it may not be possible to borrow as much with a credit card as you could with a home equity loan or cash out refinance, depending on how much equity you have and how good your credit is.
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