If you've got a few things around the house that you'd like to spruce up but don't have the money for, you might want to consider getting a home improvement loan. As the name implies, a home improvement loan is designed to pay for improvements to a house or other form of real estate.

The house and the improvements themselves serve as collateral for the loan, thus reducing the need for additional collateral to be on the line.

Best of all, a home improvement loan can help you to improve both your credit score and the value of your house all at the same time.

Collateral you can live in

Much like a mortgage or other home loan, a home improvement loan uses the equity in your house or real estate (with the equity being the amount of the home that's already paid for) as a basis for the collateral value of the home.

This value is used, along with estimates for the improvements that you want to do, to determine how much the amount of the home improvement loan is going to be. The more equity the house or real estate has in it, the larger the loan amount can be though it still needs to be within your ability to pay it back in a reasonable amount of time.

Shopping around for the best prices

Obviously, a home improvement loan is a major investment and should not be entered into lightly. Finding the right home improvement loan for you is a two-step process first you need to find out how much your improvements are going to cost, and then you need to try to find your best offer at a bank or other lender.

Shop around at building supply stores to try to find the lowest prices, and contact carpenters, contractors, and other professionals in your area for quotes on how much the work would cost. Do as much of the work as you can yourself, to cut back on costs, though don't skimp if you do need a professional to do part or all of the work. After all, it's better to spend a few more pounds than to end up with inferior workmanship or to put yourself in danger.

Once you have several quotes for both the cost of materials and the cost of labor, it's time to try to get your home improvement loan.

Visit several banks and finance companies in your area, getting interest rates and loan terms from each one. Be sure to take your previous research with you, so that the loan officers will be able to see what you have in mind and make a decision regarding your home improvement loan.

Compare the rates of several lenders before deciding on which one you want to use, and do your best to pay off the loan as quickly as possible after all, it can make it easier to get a good loan rate the next time home improvements roll around.

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