Best Personal Loans For Tiny Home Financing Of 2023

Best Personal Loans for Tiny Home Financing

Summary: Best Personal Loans for Tiny Home Financing

Tips to Compare Personal Loans for Tiny Home Financing

A personal loan can help you purchase a tiny home, as well as cover the costs of any repairs or renovations that come with it. Here are some personal loan features to pay attention to when comparing your options:

  • Interest rate. When you borrow a personal loan, you’ll have to pay back the sum you borrow plus interest. A lower interest rate means less interest paid over time.
  • Fees. Keep an eye out for any fees that could add to your costs of borrowing, such as an origination fee, application fee or prepayment penalties.
  • Annual percentage rate (APR). APR is a more inclusive measure of a loan’s costs than interest rate alone, since it includes both interest and fees. When comparing two loans, the one with the lower APR will have lower borrowing costs over time, assuming the repayment terms are the same.
  • Repayment term. Find out how long you have to pay back the loan to make sure the monthly payments fit your budget. Personal loans typically come with terms of one to seven years.
  • Time to fund. Some lenders can approve a personal loan in as little as one business day while others take longer. Make sure the loan timeline fits your tiny home buying plans.
  • Collateral requirement. Most personal loans are unsecured, meaning they don’t require collateral. If you don’t have strong credit, though, a secured loan might be easier to qualify for. However, if you default on a secured loan, your lender can repossess your collateral to recoup its losses.

What Is Tiny Home Financing?

If you don’t have enough cash on hand to purchase your tiny home, you can look into financing. Tiny home financing refers to any method of borrowing money and paying it back over time. Personal loans are a common type of tiny home financing, but you could also explore builder financing, RV loans or a home equity loan if you already own a primary residence.

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Unlike traditional homes, tiny homes typically don’t qualify for conventional mortgages. For one, mortgages rarely come in an amount lower than $60,000. Second, most mortgage lenders require that your home has a foundation, which tiny homes usually don’t. Finally, some mortgage lenders require your home to be a minimum size—your tiny home’s square footage might not make the cut.

Tiny Home Financing Options

Let’s take a closer look at your options for financing a tiny home, starting with personal loans.

Personal Loans

You can use personal loans for almost any purpose, including the purchase of a tiny home. Loan amounts range from $1,000 to $100,000 and terms extend up to seven years; loan limits and repayment terms vary by lender.

Personal loan interest rates typically range from 5% to 36%, with excellent-credit borrowers securing the lowest rates. Since most personal loans are unsecured, you’ll have to meet a lender’s requirements for credit, income, debt-to-income (DTI) ratio and other factors to qualify.

Some lenders let you apply with a creditworthy co-signer if your own credit isn’t sufficient. Others offer secured loans, which can be easier to qualify for since they’re backed by collateral, likely your tiny home. The risk of borrowing a secured loan, however, is that you could lose your asset if you fall behind on payments.

Some lenders can approve and disburse personal loan funds in as little as one business day. After receiving your loan, you’ll pay it back in fixed monthly installments over a set period of time.

Contractor or Builder Financing

Some tiny home contractors or builders offer financing options through their partner lenders. You’ll still need to meet the lender’s credit and income requirements to qualify, but you might secure a lower interest rate and longer repayment term than you would on a personal loan.

Similar to a conventional mortgage, however, this type of financing might require you to make a down payment. Plus, these loans are usually secured by your tiny home. If you default on the loan, the lender could seize your tiny home as a form of repayment.

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RV Loans

If your tiny home is on wheels, it may qualify for an RV loan. RV loans are available for vehicles that meet traffic safety standards and are certified by the Recreational Vehicle Industry Association. You might also have to use your tiny home as your primary residence.

Similar to builder financing, RV loans can offer longer repayment terms than personal loans but might require a down payment. Plus, they’re secured loans that use your tiny home as collateral.

Home Equity Loan or Line of Credit

If you already own a traditional home, you could turn your equity into cash through a home equity loan or home equity line of credit (HELOC). As long as you hold at least 20% equity in your home, you might be able to draw on up to 80% or 90% of its value.

Home equity loans are installment loans—you receive a lump sum upfront and pay it back through monthly payments over a set period of time. HELOCs, on the other hand, work more like a credit card. You have a line of credit that you can draw on as needed.

While home equity loans typically come with fixed interest rates, HELOCs frequently have variable rates. Both of these loan products are secured and use your home as collateral, so you want to be careful not to overextend yourself.

How to Apply for Tiny Home Financing

While the process of applying for tiny home financing can vary, here are some common steps to take:

  1. Check your credit. Lenders review your credit to assess your risk as a borrower, so it’s useful to know what you’re working with before you apply. You can review your credit report from and request your credit score from Experian, Equifax or other sources. Taking steps to improve your credit score before you apply could help you secure better interest rates.
  2. Compare financing options. Explore your options for tiny home financing carefully to find the best option for you. Contractor or builder financing, for instance, may not be the most affordable option if you can find a low-rate personal loan on your own from another lender.
  3. Prequalify online. Many personal loan lenders let you check your customized rates through prequalification. The process only takes a few minutes and won’t impact your credit.
  4. Estimate your costs of borrowing. Once you review some offers, use a personal loan calculator to estimate your monthly payments and long-term interest costs. Take rates, fees and loan terms into account to find the most affordable loan.
  5. Submit a complete application. Once you’ve found an offer you like, it’s time to fill out a full application. At this point, the lender will run a hard credit inquiry to check your credit, which could temporarily decrease your score by a few points.
  6. Receive your funds. Assuming your application is approved, the lender will deposit the funds into your bank account. You can then use this money to purchase your tiny home. Review your loan agreement to find out when your payments are due. Consider setting up automatic payments from your bank account so you don’t miss any bills.
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We reviewed 29 popular lenders based on 16 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and the application process. We chose the best lenders based on the weighting assigned to each category:

  • Loan cost: 35%
  • Loan details: 20%
  • Eligibility and accessibility: 20%
  • Customer experience: 15%
  • Application process: 10%

Within each major category, we also considered several characteristics, including available loan amounts, repayment terms, APR ranges and applicable fees. We also looked at minimum credit score requirements, whether each lender accepts co-signers or joint applications and the geographic availability of the lender. Finally, we evaluated each provider’s customer support tools, borrower perks and features that simplify the borrowing process—like prequalification options and mobile apps.

Where appropriate, we awarded partial points depending on how well a lender met each criterion.

To learn more about how Forbes Advisor rates lenders, and our editorial process, check out our Loans Rating & Review Methodology.

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