The recent phenomenon of upside down home loans means that, through no fault of their own, many homeowners have little to no equity in their homes and therefore can’t apply for a home improvement loan for needed repairs or updates, but there is a new solution.
With the idea of peer to peer loans, homeowners have a revised way to finance home improvements. Peer to peer lending is a group of investors (lenders) and borrowers who meet on a site and bid on lending or borrowing funds. It is a normal lending and borrowing process, except that banks or other financial institutions that normally act as loan intermediaries, are no longer in the picture.
Since no collateral is needed, the value of your home will not enter the equation. This offers homeowners a new way to obtain a home improvement loan for required or even just desired changes, such as additions, renovations and other improvements.
Your home is probably your largest investment, and adding to its value with new kitchens or bathrooms will definitely pay off in the long run, even as you enjoy them today while you are still living in the house. In addition, there are other home improvements that save the homeowner so much money that they become self funding even as you enjoy them, such as high efficiency appliances, high energy rated furnaces or water heaters, modern insulated windows and doors, etc. Energy bills are extremely high, and no one expects them to come down, so these types of improvements can save thousands of dollars annually.
Nothing could be simpler than applying for a peer to peer loan. The sites that exist to administer peer to peer loans make the system as effortless as possible for both the borrower and the lender. All the borrower has to do is 1) Create a loan listing 2) Put the listing on the site for auction 3) Watch as lenders bid for their loan. As in any type of loan, a better credit profile will mean a lower loan rate, but since total costs are reduced for the lenders, even less than perfect borrowers should get a better rate than they would through a traditional bank lending operation.
There are lenders of all sizes on peer to peer lending sites and short term investment, but historically, loans in the range of $1,000 to $15,000 are the most popular among bidders. These amounts seem almost perfectly suited for home improvement loans, since an energy efficient washer and dryer would run about $1,000, and an average kitchen remodeling job should cost about $15,000, perfect for the homeowner with these projects in mind.