The Finance Blogger

Our last post was from a reader who is considering applying for a home improvement loan in California. They wanted to know if it was a good idea or not to take on a home improvement loan. Considering his situation and circumstances. They also wanted to know were to apply for a home improvement loan. We get a lot of emails and comments about these sorts of questions. We will try to answer them in our next post. In the mean time, his question and situation are described below. It is pretty typical of many people who are looking for home improvement loans.

To summarize, this reader was considering a home improvement loan of $40,000. He had an existing mortgage which had 5 years left on it before it was fully paid off. They also had a car loan. They routinely paid their credit card balances each month. Also they did not indicate what the monthly payments were for the car loan and the mortgage.

Both he and his wife expect to be retiring from their jobs in the next few years. They are concerned about taking on additional debt such as this home improvement loan. One other concern was mentioned as well. The reader mentioned that he was concerned that his company may be downsizing in the next year. Although he did not indicate if he was at risk or not, this was a concern for him in terms of being saddled with a large loan and being out of work. Finally they indicated that this loan was an optional project. As a result if it did not make sense to go ahead, that would also be ok as well.

Debt Advice for Our California Home Improvement Loan Reader

Well it is a bit difficult to answer this readers questions since he did not provide some critical bits of information such as his current mortgage payments and his car payments. We cannot tell if his monthly payments with the home improvement loan added in would be in a satisfactory range or not so this is one area that our reader should confirm with the bank that he deals with. Typically they look for total monthly payments on all loans and mortgages to be in the 25% to 35% range of gross income, although this will vary from bank to bank.

He mentioned that he has concerns about downsizing at the company he works at and that carrying the additional monthly payments associated with the home improvement loan would be difficult.  Depending on how real this concern is, he may want to defer this loan until he has a better feel for his position at the company. It can be disastrous if you default on a loan. Your credit rating drops like a stone and he could even lose his home if he is unable to make the payments.

This is an optional home improvement loan. He does not need to go ahead with these improvements for repair reasons or other critical reasons.  Given this last point and the issue of job stability, we think it will be in the best interest of the  reader to delay this home improvement loan.

Once they Retire

Once they retire and have a stable fixed income, they can then decide if they wish to go ahead with these improvements or not. They can also choose to complete the project in smaller stages. Which may make it more affordable for them as well.

We encourage our readers to ask questions and provide as much information as possible to enable us to provide a complete answer about their debt questions. We tend to be conservative in our answers and will lean towards saving money and reducing costs as well, especially in these economic turbulent times.

For more home improvement loan advice, click here.

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