Unsecured Loans for Financing a Kit Home
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17 May 2013
Among the many types of financing available for purchasing steel frame kit homes, unsecured loans are popular among certain types of owner-builders. In order to help you select the right type of financing for your needs, we've put together this guide to unsecured borrowing.
The Basics
The term unsecured loan is used to describe any type of loan where there is no collateral pledged to a financial institution. Unsecured loans are offered by nearly all banks. These loans can typically be used for any type of purpose, including purchasing a kit home.
Types of Unsecured Loans
There are two main types of unsecured loans for steel frame kit homes: instalment loans and lines of credit. With an instalment loan, a bank provides you with a lump sum of money, which you then pay back in a set number of equal payments that consist of principle and interest. After the set number of payments are paid, your loan is finished and closed.
With a line of credit, a bank makes a set amount of money available to you. When you need to access the funds, you can borrow any amount up to your credit limit. Then, you repay the interest accrued plus a percentage of the principle owed. As you make payments, money becomes available for you to borrow again. A line of credit contract may be for a set number of years, or it can remain open until you pay it off and close it
Benefits of Unsecured Loans for Kit Homes
Unsecured loans are ideal for prospective owners who do not have collateral to pledge, such as a home or investments. Typically, fees for unsecured loans are lower than those charged for secured loans, as an appraisal of property is not required.
Things to Keep In Mind
Because there is no collateral involved with an unsecured loan, banks are often more selective about loan approval. Depending on your income and credit history, you may not be able to qualify for a large enough loan to pay for the entire kit home. Also, interest rates for unsecured loans are generally higher than loans secured by collateral.
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