Category Archives: Loans

Loan Basics

Are you looking to buy something that might be just out of reach? Is there something on your mind that you need some extra money for, such as a home renovation? If so, you might want to look into the possibility of borrowing money from a bank or other lending institution. This article will go into the loan basics that you should know prior to actually borrowing. loan basics

Loan Basics

Loans are a common way of borrowing money for people looking to purchase big-ticket items such as cars or homes (in the form of home mortgages), or to fund things like home improvements or college educations.

Receiving a Loan

When receiving a loan whether it be a mortgage or a kitchen remodel loan, a lender will provide you with all of the money that you have been approved for a lump sum. Once you’ve received the money, a monthly payment structure will be negotiated with the lender. Each month, you will pay back a portion of the loan in what is called installments over a fixed period of time until you’ve repaid the entirety of the loan. Lenders refer to this as a long-term loan.

However, when you are considering a loan, remember that there will be costs involved when you are borrowing money from banks and other lenders. This is how the lender makes money on loaning money to people. After all, it is a business.

The lender, whether it is a bank or some other entity, will charge an extra amount above the value of the loan. The amount of money that you have borrowed is referred to as the principal of the loan by the bank. Any extra money that the bank charges to lend the money to you is the interest.

There are a number of factors that decide the amount of interest that a lender will charge you, but there are three main ones. Those factors are:

  • How much money you are borrowing: The interest charged will be a percentage of the amount you borrowed over the life of the loan. Borrowing more money for things such as a pool or more means paying more in interest.
  • The interest rate: The lender will offer an interest rate to be added to the loan. This percentage will also be added to the life of the loan and you will make payments to it each month as you make payments to the principal.
  • The term of the loan: The length of the loan also impacts the amount of interest that you will be charged. Interest is spread over the life of the loan. This means that if your loan has a longer-term, there are more monthly payments for the interest to be applied to. This will also mean a higher interest rate.

One more thing to remember when considering borrowing money is that the lender may charge other fees beyond interest in return for providing the money to you. These fees vary by lender.

Bottom Line 

These are only the loan basics of borrowing money from a lender. The process to acquire a loan isn’t a short one and you will need to watch out for warning signs and learn how to pick the right lender. You can also check with your accountant to ensure that you’re able to afford certain loans. However, the pros at Tax Day Tea Party state that with the basics down, you will be on your way to getting that big purchase that you’ve always wanted. You can reach out to us if you have any further questions. 

 

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Kitchen Remodel Loans

Loans

Do you want to give your kitchen brand new look, but you are stressed because of high costs? Remodeling a kitchen is an exciting experience for all homeowners. However, the cost associated with kitchen remodels is typically high for many people. Kitchen remodels are one of the most expensive home improvement projects that a homeowner can ever undertake. In fact, it is actually the second most expensive home improvement project that you can do. Kitchen remodeling can cost you anywhere from $12,589 to $33,067. The average cost is about $21,668, but the cost can go up to six figures depending on how you want your kitchen to look. However, high costs should not discourage you. There are various financing options that you can choose to help you build your dream kitchen. In this article, we are going to discuss kitchen remodel loans that can help you achieve the kitchen you’ve been wanting.

Kitchen Remodel Loans

  1. Home Equity Loan

Did you know that you can have your dream kitchen just by applying for a home equity loan? However, this type of loan usually uses your home as collateral; meaning that you actually risk losing your home if you fail to make payments on time. Home equity loans can be compared to taking a second mortgage. This type of loan has a fixed interest rate, where you will be required to make fixed monthly payments as per the specified terms. The interest paid is tax deductible.Kitchen Remodel Loans

  1. Home Equity Line of Credit

If you are looking for a cheaper and more efficient way to finance your kitchen remodeling project, then look no further than taking a home equity line of credit. This type of loan is similar to using a credit card. You will use your home as security. Unlike a home equity loan, where you receive a lump sum, a home equity line of credit only allows you to borrow small amounts of money over a certain period of time. Interest will be paid only on the amount that you have borrowed. You need to have good credit history in order to benefit from this loan.

  1. Contractor Financing

You can also fund your kitchen remodeling project by using contractor financing. The only setback when you choose this option is that you only have one loan to consider. This means that you don’t have an option to compare other competitive payment plans.

  1. Personal Loan

If you don’t have enough equity to use in your home, then a personal loan is your best option. Personal loans are usually unsecured, meaning that you don’t have to use your house as collateral. The application process is quick, and once the process is completed, the money will be disbursed into your account immediately. They have a fixed interest rate and longer repayment terms. The interest charged will depend on your credit score. For instance, if you have a low credit score, then you will pay a higher interest rate.

Which Loan Should You Choose?

Remodeling any part of your home is extremely exciting — especially if it is your kitchen. These different types of kitchen remodel loans will help you take the next steps towards installing a new back splash, replacing your counter tops, etc. Regardless of the option that you choose to fund your project, it is advised that you consider all of the pros and cons of each option to make sure that you’re saving as much as possible.

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