A personal loan is one of the preferred mediums of financing home remodeling projects. A personal loan can help fast-track the home renovation project, whether a planned remodel or an emergency repair.
You can always use a home remodel loan calculator available online to find repayment terms favorable to your current financial situation.
Different Fields in A Personal Loan Calculator
Some of the standard fields on a home remodel loan calculator are as follows:
First, decide on the type of project you want to undertake. The remodeling cost will vary significantly depending on the type and extent of changes you wish to make. For instance, do you simply want to get a new countertop, or do you want to change your entire flooring and redo the walls too?
Considering the size of the remodel, savings, budget, and your current income, determine the additional amount that you will be securing through a personal loan. This is your principal amount on which conditions like interest rate will be applied.
Depending on the lender, you can take a loan for five years or pay it off in 6 months. It is the agreed-upon number of months for which you will be repaying a part of the principal amount and interest rate. The percentage of the interest rate applied may differ depending on how long the loan term is.
The lender uses your credit file to draw up your risk profile. A good credit score is an indication that you pay your bills on time, make payments on time, and have no significant debts pending. In addition, it helps build confidence with the lender that you are a reliable borrower and will repay the loan as agreed.
You can choose the credit history level as average, good or excellent, but the actual consideration will be according to the lender’s assessment.
How frequently will you be paying the loan off? Monthly is one of the popular and most offered repayment frequencies by lenders. However, depending on the bank, you can also choose to repay the loan weekly or fortnightly.
According to RBA data, the average fixed personal rate as of February 2020 was 12.46%. By default, when you open the calculator, the interest rate would be around the same range. However, you could land a lower interest rate if your credit history is excellent.
You can adjust the interest rate on these calculators to see how much you will pay at different interest rates. But remember, the calculator is for estimation purposes only; actual values may differ based on the bank’s own assessment of your financial situation and credit history.
Example of Using the Home Remodel Loan Calculator
First, enter the loan amount you want to take, say $10,000. Next, choose the repayment period from 6 to 60 months. And, assuming your credit score is in the average bracket, and repayment is scheduled once every month, your interest rate is likely to be around 12.99%.
That is, if you take a loan for six months, your monthly repayment amount will be $1,730.38, and the total repayment amount will be $10,382.27. Now, if you extend the term to 24 months, your monthly repayment amount will be $475.38, and the total repayment amount will be $11,408.91.
This is why it is necessary to consider your current income. You can adjust the loan term according to your unique requirement.
If you wish to get lower interest rates on your loans, you will need to first work on increasing your credit score. A pro tip to do so would be limiting credit applications to avoid hard inquiries on your credit file.
Personal Loans for Your Dream Home
Personal loans provide you with the flexibility of structuring terms according to your requirement and repaying capability. The home remodel loan calculator is a valuable tool to help you understand how your repayments are likely to be in the future, so you can plan for the same before you put in your loan application.