Among the unexpected expenses that can pop up in your life, a home repair might be the costliest. It can also be the most urgent, depending on what needs fixing. This means you need money quickly.
Here are some different types of loans to cover home repairs, including home equity loans, lines of credit, and cash advances. Each of these has its own benefits.
Cash advances
A cash advance is a personal loan that gives you fast access to funds. The terms are short because you’re meant to repay the loan on your next payday, which means the loans are generally for less money than a traditional loan. You can usually be approved for up to around $1,500 and apply for the loan online or in person. If you’re approved, you get access to the funds almost immediately.
When the loan is due, you’ll repay it, plus any interest and charges.
Cash advances are unsecured, so you won’t have to use your home as collateral when applying.
Who is a cash advance good for?
A cash advance is suitable for people with low or poor credit but need to pay for an urgent repair. Many lenders have more lenient requirements for cash advance approval, and they may consider your employment history and income when reviewing your application.
Because cash advances are for lower amounts than other loans, you won’t be paying for an extensive or costly repair. But a cash advance might be your best option if you need something small done urgently.
Make sure you can pay the loan back in full by the due date, or you could face hefty fees.
Home equity loans
If you have an expensive repair, a home equity loan is another option. It’s based on the equity you’ve built up in your home by assessing your home’s value and deducting any amount left owing on your mortgage. If you’re approved for a home equity loan, you’ll continue making your monthly mortgage payments–if you have any–as well as your loan payments.
Remember that you may pay origination fees and closing costs, so factor those into the cost of your loan. Your fixed interest fees may be lower than other loans, but that’s also because your home is used as collateral.
Who are home equity loans good for?
Home equity loans are good for people who have built home equity and need funds for a big, one-time project. The funds are only dispersed once, however, so you need to budget to ensure you have enough for the total cost of the repair.
Line of credit
A line of credit gives you access to funds on an ongoing basis. Like a credit card, you access funds as needed, and interest is only charged on the amount you use. Interest rates are usually lower than you’d find on a credit card. A line of credit might give you the financial flexibility you need if you have a large repair or one requiring ongoing payments and purchases.
Who is a line of credit good for?
People who have a more extensive repair that may require ongoing work. As you pay off the borrowed amount, it becomes available to you again until the agreed-upon deadline. However, interest rates are variable, so you may start paying low rates and wind up with much higher rates over time.
The bottom line
When evaluating your options, remember how much money you’ll need, how quickly you need it, whether your credit score is high enough for a traditional loan or line of credit, and how much you can afford to repay.
