Home improvement loans are a good option for low-income families who want to repair or renovate their homes but need more money for such changes. Improving one’s home requires a lot of money, not to mention the prices of the materials needed and the labor fees.

That’s the reason why some families avail of home improvement loans. Not only does it help with expenses on renovations and repairs, but there are options that offer low-interest rates for low-income families.

What is Home Improvement Loan?

A home improvement loan is a type of loan that you can use to fund home renovation, repairs, and even remodeling. Home improvement loans need to be paid back like other types of loans. This means that being qualified for one may require a good credit score and background.

The amount of money you can borrow also depends on whether the project is minor or major. There are several government-backed loans and grants for home improvement, and there are also other types of loans that you can use as home improvement loans such as personal loans, home equity line of credit, and home equity loans. Each has its own pros and cons and its suitability depends on your needs and credit score.

Best Loans For Low-Income Families

Here are some of the best home improvement options for low-income families that are backed by the federal government:

The Home Investment Partnership Program

This program is administered by the Housing and Urban Development (HUD) and funded with the help of various non-profit organizations. The Home Investment Partnership Program is established to help low-income households fund house projects such as building, renovating, and repairing. Families who plan to repair or renovate housing units may also avail of the Home Investment Partnership Program.

You can avail of the said program if you meet the following qualifications:

• Has an average income of 60 percent of the HUD-adjusted median family income.
• For rental, the applicant must have at least 20 percent occupied units, with the occupants not earning more than 50 percent of the HUD-adjusted median family income.

Section 504 Home Repair Program

Also known as Single-Family Housing Repair Loans and Grants program, it aims to provide assistance to low-income families and disabled elderly in funding various housing projects including housing insulation systems, septic systems, and energy efficiency projects.

To apply for the said program, applicants must meet the following eligibility requirements:

• Live in a rural area
• A legal US resident
• Must be 18 years old or higher
• The house to be funded must be owned and occupied by the applicant
• Family income is less than 50 percent of your area’s median income
• Must be unable to get credit from lenders
• For grants, applicants must be 62 years or older and unable to get a loan

Native American Housing Improvement Program

The Native American Housing Improvement Program is another option for low-income families to get financial help for house repairs, rehabilitation, and renovation. This program is administered by the Bureau of Indian Affairs (BIA) making it well-known among Native Americans.

Eligible applicants may receive about 7,500 USD to be used for repairs to improve the health and safety of the family. On the other hand, families who need major house repairs and renovations can avail up to 60,000 USD.

Here is a list of requirements to get assistance:

1. Must be a recognized Native American or Alaska Native
2. Must reside in an approved tribal area
3. Must have a substandard property (this will be determined by federal regulations)
4. Must have a substandard property (this will be determined by federal regulations)
5. Must be unable to find other resources for housing assistance
6. Current property must not be acquired through federal housing assistance programs

Types of Loans You Can Use as Home Improvement

The following are other types of loans you can use to improve your home:

Personal Loans

Personal loans are one of the most commonly used loans for home improvement because they give the borrower the option to use the funds for other financial needs other than home improvement projects.

Also, this type of loan is a type of unsecured debt. Unsecured debt means that the loan doesn’t involve any collateral which means that even if you fail to pay back your loan, the lender will not be able to get your house, car, or other collateral. However, failing to pay may drastically affect your credit score making it harder to get another loan.

Another benefit of personal loans is that the application process is much easier and you’ll get your funds faster than other types of loans for home improvement. That’s why a personal loan is a good option if you want to get your home repaired or renovated right away.

Home Equity Loans

This type of loan may be a bit more complex than personal loans. Home equity is an example of secured debt. Secured debt involves collateral in which, if you failed to pay back the loan, the lender will be able to get your house as the collateral.

The good part though is that since the debt is secured, the lender is ensured that s/he will be paid back. Also, home equity loans generally have cheaper interest rates, making it easier for the borrower to repay the loan.

The amount of money a borrower can get may depend on one’s home’s equity. Home equity is the amount of money you already paid on your mortgage. For example, if your home value is worth 300,000 USD and you have 200,000 USD left on your mortgage, then your home equity is 100,000 USD.

As you pay off your mortgage, the higher your equity will be. So if you have higher equity, your lender may be able to let you borrow a higher amount. Generally, borrowers can borrow about 85 percent of their equity.

Home Equity Line of Credit

Also known as HELOCs, this type of loan for home improvement is a combination of a home equity loan and a credit card. Just like home equity loans, this type of loan is a secured debt and it includes your property as collateral.

The primary difference between HELOCs from home equity loans is that they give borrowers limited funds. This means lenders will let you borrow money when you need it. This is a good option if you plan to renovate your home gradually over time.

The only downside of HELOCs though is that applying for one can be a bit trickier and time-consuming as you need to undergo an underwriting process before being qualified for a home equity line of credit.

Final Word

Applying for a Home Improvement Loan helps fund necessary home repairs and renovations, especially for low-income families. Aside from government-backed home improvement loans, you can also use other types of loans like personal loans, home equity loans, and home equity lines of credit to fund your next housing project.