Financing Your DIY Project
Financing your DIY project can seem a bit daunting at first. In fact, it’s probably one of the most important aspects of your project. Financing a DIY project successfully means that you’re going to need some sort of business plan, and preferably, a loan of some sort. There are several ways that you can obtain financing for a DIY project; the key is coming up with something you can present to a lender that you trust. So how do you do that?
The first step to financing your DIY project is to put together a good business plan for your project. Your business plan will essentially be your roadmap to walking your project through. It lays out exactly what you plan to do and how you plan to do it.
In different parts of the country, there are different options because of the way that state governments work. And you can also pull money from these types of loans in order to get cash for your DIY project!
For example, a cash out REFI loan in Los Angeles might work different than one in New York. Or a reverse mortgage San Diego loan might be different than one you could find in Florida or somewhere on the east Coast.
Back to the business plan – this includes a mission statement detailing why you’re building on what you’re building, who your target market will be, and how long it will take you to complete your project. A mission statement will prove very helpful to any lender as it outlines exactly what you need money for and gives details about your finances.
Once you have your business plan completed, you should get together with a financial advisor or a bank officer and have them review it. They’ll want to know exactly how you plan to use the loan proceeds; they’ll want to see your projected income, expenses, and whether or not you’ll be able to pay the loan back in a timely manner. Banks and lenders will also want to see your credit history. While having poor credit may prevent you from obtaining a traditional loan, a home equity line of credit (HELOC) can help you get a traditional loan if your credit is less than perfect. A HELOC can be used to finance nearly any purpose, so don’t hesitate to explore the option with a lender.
After you have an approval from a lender, you will need to submit your application. This can often be done online through a lender’s website. If you have good credit, you may be approved without a formal application. However, even those with less than perfect credit can be approved if they meet the lending criteria. The lender will require some documentation, such as a profit and loss statement, tax returns, and so on. You will likely need a minimum amount of capital to invest with, so be sure to provide that information as well.
There are several types of home equity loans available. One is a mortgage loan that allows you to borrow the purchase price of your home, which will be the entire amount of the loan plus the interest. Depending on your credit, you may need to obtain one of these mortgages.
Another type of loan is a home equity line of credit (HELOC). A HELOC works much like a credit card. Instead of making payments to a lender, you make payments to an external funding source. You may also receive reductions in your interest rate when you maintain a HELOC.
Private loans are also available from private lenders. These can either be secured or unsecured. A secured loan requires collateral, such as real estate or personal property. Unsecured loans, however, do not require collateral. Because of this, unsecured loans typically carry a higher interest rate. Because of this, however, they are often a better option for shorter-term needs.
For larger projects, such as home remodeling, there are also a number of non-traditional finance options. You may be eligible for federal loans, for example. Some lenders will work with you to create repayment programs that fit into your budget and lifestyle. Whatever method you choose, you will have much control over how and when you use your money.