Congratulations! We’re excited to find you personalized rates.
Now you get to decide which to claim for your renovation. This article will help you understand your prequalified offers so you can make an informed decision.
- Why personal loans may be a good fit for your project.
- How to understand your prequalified offers.
- What to expect after you claim your prequalified offer.
Before we discuss personal loans, let’s clear up one important distinction:
Your offers are prequalified because lenders did not perform a hard credit pull and verify your income. A hard pull won’t happen until the end of your chosen lender’s application. You’ll then receive your final offer. If you submitted correct information, then your prequalified offer will likely match your final offer.
Personal Loans 101
Every loan you find through Hearth is a personal loan. For a moderate to large project, a personal loan offers you several benefits:
- Zero Collateral: Some financing options, such as HELOCs or home equity loans, require equity in your home as collateral in return for low rates. Collateral puts your home at risk of foreclosure if you cannot pay your bank back. Personal loans are different. Inability to pay does not put your home on the line, although non-payment does affect your credit score.
- Low Rates: Personal loans tend to have lower rates than credit cards or other uncollateralized options. Although credit cards can advertise 0% rates, the rates often skyrocket after a 12 to 18 month promotional period.
- Quick Application Process: After completing a quick application, you can get your funds in 1 to 14 days.
- Transparent Fees: Every lender is transparent about the fees you’ll pay. These likely include a small origination fee, a service fee, and late fees. You won’t face a penalty for paying back your loan early.
- Short Terms: A loan’s term tells you how long you’ll be paying it back for. Personal loans have terms from 18 months to 7 years. This means you won’t be in debt decades from now.
Personal loans can also help you avoid renovation risks such as problems with your contractor and too much debt. Read our Homeowner’s Guide to Avoiding Renovation Risks to learn more.
How to Understand Your Prequalified Offers
After completing your Hearth application, you’ll see your prequalified offers. In this section, we’ll help you understand what each criteria means and how it should influence your decision:
The Boxes on Top
We recommend you start by looking at the three boxes on top of the page. Each finds you an offer that meets a common buying criteria.
Lowest Total Interest Cost
The lowest cost box calculates the total amount of interest you’ll pay throughout the loan, and shows you the prequalified offer with the lowest result. Remember interest is the price you pay for the ability to borrow money.
The lowest cost box is best for homeowners looking to minimize the total amount they want to pay for their loan.
<Screenshot of lowest payments box>
Lowest Monthly Payment
The lowest payments box shows you the prequalified offer with the lowest monthly payments. Monthly payments include both interest and fees.
The lowest payments box is best for homeowners looking to minimize the amount they spend each month. If you have other monthly expenses that take a large part of your budget, such as medical bills or a primary mortgage, then you may want to consider a loan with a low monthly payment.
You’ll likely face unexpected costs during your renovation. According to a Houzz survey, homeowners exceed their renovation budgets largely because they want to upgrade mid-course. There’s also the risk of costly delays from your contractor.
That’s where extra value comes in. We find you the lowest cost way to add a bit more to your renovation budget.
Other Concepts on the Prequalified Offers Page
Term is the amount of time you’ll spend paying back the loan. For example, a three year term means you’ll make monthly payments for three years. Longer terms mean you owe money for longer, but they tend to reduce the amount you’ll pay each month. Shorter terms usually have higher monthly payments, but you can pay back the loan quicker.
If you have a lot of other monthly expenditures, then you may want to consider a longer term to lower your payments.
Monthly payment refers to the amount you’ll pay each month, including fees.
Loan amount refers to the total amount of money the lender is willing to give you. You’ll actually receive a bit less, depending on your origination fee.
Your Annual Percentage Rate (APR) is the annualized cost of your loan, including fees. It’s the most accurate way to determine how much you’ll pay a year for your loan.
What Happens After You Press “Claim Offer”?
You’ll have 30 days to decide which prequalified offer to accept, and we’ll even send them to your inbox for safe keeping. After you make a decision, press “Claim Offer” to continue your application with the lender.
You’ll have to provide more information. For example, some lenders may ask you to verify your income. The application process concludes with a hard credit pull, where the lender checks your credit report. This does affect your credit score.
After the hard credit pull, you’ll receive final rates. These rates should be exactly the same as or very close to the ones you saw on Hearth. We give you as accurate rates as possible given the information you provided us.
You’ll then receive your money within 1 to 14 days–moving your renovation closer to success!