Planning home improvement projects is usually fun and exciting, until you think about how you’re going to pay for all that work. If you don’t have enough cash, you’ll need to look into home improvement financing options, such as a home improvement loan. Read on to learn about some of the available types of home improvement loans, and determine whether one of these is right for you.

Cash-Out Refinance

If you’ve already got a mortgage, and you’re paying high interest rates, consider a cash-out finance. With a cash-out refinance, you mortgage a larger amount than what you owe, and can use the extra cash to finance your home improvements. Some important facts about this home improvement financing option are the following:

• If interest rates are lower than your first mortgage, you may lower your monthly payments, even with the extra cash in your hands.
• You don’t need to have built equity in your house.
• You’ll have to pay closing costs.
• Your first mortgage is replaced.

Home Equity Loans

If you’ve been in your home long enough to build equity, you may be interested in a home equity loan, secured by your home’s equity. You can choose a fixed rate and enjoy stable payments for the life of the loan. Some advantages of home equity loans include:

• Ability to borrow large amounts of money, depending on your equity
• Lower interest rates than many other loans
• No need for a great credit score
• Tax deductible interest.

If you decide on a home equity loan, you should be very sure that you can afford to keep up your payments. Since these loans are secured by your home equity, you could lose your home if you fail to make your payments.

Unsecured Loans

Unsecured, or personal loans don’t use your home as collateral, so they may be a good choice for homeowners who have not yet built up a significant amount of equity. You can find offers for personal loans at banks or credit unions. A loan option that doesn’t require collateral, has a few drawbacks, however:

• You can’t borrow as much money as you’d be able to with a secured loan.
• You’ll be charged higher interest than you would with a secured loan, to compensate the lender’s higher risk.

VA Loans

If you or your spouse served in the military, you may qualify for a VA home improvement loan. With these loans, veterans can borrow up to 90 percent of the equity in their homes. With this home improvement financing option:

• Fixed interest rates can be as low as 5 percent, with terms up to 15 years.
• Loans of $3,000 or less can substitute a guarantor instead of a mortgage for collateral.

Title 1 Loans

For necessary home repairs and upgrades, Title 1 loans are an excellent choice. These loans are available through traditional lenders including banks and credit unions, but backed by the Department of Housing and Urban Development. Because of this federal insurance, interest rates are lower than many other loans. Title 1 funds can only be used for necessary repairs including roofs and windows. Luxury projects, such as swimming pools and saunas, do not qualify.