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Obtaining government subsidized loans or direct private lender financing is the usual method for homeowners in the United States to finance the costs of repairing, rehabilitating, updating, or remodeling of their homes if they do not have sufficient money to finance those activities. There are usually two options for homeowners to obtain loans for home remodeling or also known as home improvement financing. The homeowners could apply for government subsidized loans administered and distributed by private banks, or apply directly for loans from private lenders, banks, finance companies, and other sources of private financing.

The home improvement financing subsidized by the federal government is offered by the U.S. Department of Housing and Urban Development (HUD), which oversees the home improvement loans that are administered and distributed by private lenders.

There are four main types of home improvement financing that homeowners could obtain from different sources of private financing:

• Personal loan – This is usually an unsecured loan that is not supported by collateral and is usually granted based on the individual’s ability to pay the loan. However, the main disadvantage of a personal loan is the high interest rate it carries because of the unsecured nature of the loan.
• Secured loan – This is a loan in which the borrower pledges some assets as collateral to support the loan and ensure its payment.
• Dealer financing – This is a loan in which the dealer from whom the borrower  would purchase his home remodeling materials would receive a loan provided by the dealer.
• Bank loans – This is the regular consumer loans for home improvements that are provided by banks to homeowners and those loans would usually consists of small amounts of money that must be paid in a few years instead of many years spanning several decades.
• Home equity lines of credit (HELOC) – This is a loan that uses the available equity in the home or property for securing a second mortgage, which means the borrower has a previous first mortgage. A HELOC does not change the validity of the first mortgage, but the HELOC would use the remaining equity in the home or property.

Home Improvement Financing Resources:

 
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