In 2017, hurricanes ravaged parts of the U.S., destroying people’s homes and businesses. The storms caused over $200 billion in damage, according to National Geographic.
The rebuilding process can be slow and expensive, and it can eat up your savings. If you’re facing an emergency home repair, find out what you can do to pay for it.
4 ways to pay for an emergency home repair after a disaster
Home insurance can help in the case of an emergency, but not everyone has coverage. Plus, the policy you have might not cover you in all situations. That was the case for many people in Texas after Hurricane Harvey. Research firm CoreLogic estimated that 70% of those affected by Harvey didn’t have flood loss insurance, leaving them to bear the cost of repairs on their own.
Emergency assistance, such as grants from the Federal Emergency Management Agency (FEMA), can help cover the gap. However, not everyone impacted by a disaster qualifies for FEMA aid. If your home is in a county that’s outside the area declared a disaster zone by FEMA, you might not be eligible for assistance.
If your insurance coverage won’t cover the cost of your home repair and you don’t qualify for FEMA aid, here are four ways to pay for it instead.
1. Small Business Administration (SBA) loan
Although the SBA is known primarily for providing business owners with low-interest loans, it provides other forms of assistance, too. In some cases, the agency offers disaster loans to homeowners, business owners, and renters. If your primary residence was damaged, you could be eligible for a loan as high as $200,000 for repairs. SBA disaster loans also can be used to replace personal items that were damaged, such as clothing, furniture, and cars. You can borrow up to $40,000 for personal property needs.
Depending on how much you borrow, you might need to put up an asset as collateral. The rates for SBA disaster loans often are lower than the rates on other kinds of loans or credit. Plus, you can have a repayment term that’s as long as 30 years, helping make the repairs more affordable.
2. Title I Home and Property Improvement Loan
If the damage to your home and property isn’t extensive, a Title I Home and Property Improvement Loan can be a useful option. The Federal Housing Administration (FHA) insures these loans, lessening the risk to the lender. Because the FHA is willing to insure the loan, you sometimes can qualify for lower interest rates than you could get elsewhere.
For repairs on a single-family home, you can borrow up to $25,000. If you’re repairing a townhome or apartment, you can borrow up to $12,000. Depending on the type of home you have, your repayment term can be between 12 and 20 years.
Interest rates vary by location and lender. Not all lenders can offer such Title I loans. Only financial institutions approved by the U.S. Department of Housing and Urban Development (HUD) are allowed to offer the loans. You can use HUD’s locator tool to find an approved lender near you.
3. Home equity loan
Another option to consider is a home equity loan, where you borrow money from a bank or financial institution using the equity in your house as collateral. Your home equity is the difference between the current value of your property and the amount you owe on the mortgage. For example, if your home is worth $200,000 and you owe $180,000 on it, your home equity is $20,000.
You can borrow a percentage of your home equity to pay for necessary repairs. According to the Federal Trade Commission, the amount you can borrow usually is capped at 85% of your equity. That means if your equity is $20,000, you can take out a loan of up to $17,000.
Because you use your home as collateral, there’s some risk to taking out a home equity loan. If you fall behind on your payments, you could lose your home, so it’s important that you borrow as little as possible to make the repairs.
4. Unsecured personal loan
If you don’t qualify for other loans and can’t afford to pay for an emergency home repair on your own, you can take out an unsecured personal loan.
With a personal loan, you can borrow up to $100,000. You can use the money to make repairs, replace damaged items, or pay for hotel stays while your home is under construction.
Unlike some other kinds of loans, personal loans usually don’t require any collateral. That means you don’t have to put your home or another valuable asset at risk. If you fall behind on your payments, your credit report can be damaged, but the lender won’t be able to seize your house or assets.
However, keep in mind that personal loans can have higher interest rates than those on other home repair loans.
The lender will determine your interest rate based on your credit history and income. Depending on your credit, you could face a rate as high as 36.00% — and sometimes higher. The interest incurred could cause your total loan amount to grow over time. Use our personal loan calculator to find out how much you’ll have to repay under different interest rates.
If you decide this option is right for you, then it’s a good idea to compare offers from multiple personal loan lenders to get the best deal.
Rebuilding after a disaster
If you’re facing an emergency home repair, the cost can be staggering. However, there are several types of financing available to help you make repairs while staying within your budget.
If you need help with other expenses, such as food or transportation, check out these six charitable resources for assistance.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|7.73% – 29.99%||$1,000 - $50,000||Visit Upstart|
|5.81% – 15.37%1||$5,000 - $100,000||Visit SoFi|
|6.87% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|8.00% – 25.00%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|