Money Management

Home Improvement Loans: The Freedom Peer to Peer Lending Offers

Looking to make renovations, repairs, or additions to your home? It used to be that in order to secure funds to improve your home you needed to visit a bank to refinance your mortgage. But why should you need to take out a second mortgage just to add value to you home?

Peer to peer (P2P) lenders like Lending Club offer personal loans fulfilled by investors who, in turn, take a piece of the loan’s interest. While the vast majority of borrowers use these loans to consolidate their debt, few may be aware that these personal loans can also be used for home improvements or loans without taking equity out of their houses.

Home Equity Loans vs. Home Improvement Loans

Traditionally when home owners sought to make repairs to their homes, perform renovation projects, or add additional items such as swimming pools they took out what is knows as a home equity loan (HELs). These types of loans are also commonly known as second mortgages. Home equity loans are typically paid back monthly over the course of 10 to 15 years at a fixed-rate.

The downside of these types of loans is that your amount and payment plan are preset for you. So if your project is under budget, you will still need to pay interest on the full amount you were approved for regardless. Another negative is that the terms of some home equity loans forbid you from renting out your house until the loan is repaid. Of course there’s also the reality that you could lose your home should you no longer be able to make the payments.

Unlike HELs, peer to peer home improvement loans do not use your house as collateral. Furthermore, since they are simply personal loans there are no restrictions on renting or selling your home.

Lending Club offers home improvement loans for up to $40,000. That amount can be used for any home project or really anything else you’d like to spend the money on. Like home equity loans, the loans are fixed-rate, but unlike some HEL’s Lending Club does not charge any prepayment penalties, allowing you to save additional interest should you be able to repay your loan quicker than expected.

Peer to Peer Loans and Lending Club

Lending Club is the leader of what is known as peer to peer lending. Their platform matches up qualified borrowers with investors willing to fill their loans. Lenders can put as little as $25 towards any given loan and they receive a part of the interest paid on the loan in return.

Thanks to Lending Club’s efficient web-only model, the company is able to offer competitive loan rates to their customers. Additionally once the loan is filled the borrower can receive their money right away, allowing them to get started on their home improvement projects as soon as possible.

Since launching in 2007, Lending Club had facilitated over $16 billion in peer to peer loans. The company went public in 2014 and now trades on the New York Stock Exchange.

Conclusion

If you’re looking to remodel or make additions to your home, getting a personal home improvement loan from Lending Club is a great alternative to taking out a second mortgage. With no rent restrictions or prepayment penalties, a peer to peer loan will give you the freedom to complete your project your way. Be sure to visit Lending Club’s website for information on their home improvement loans today.

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