Home improvement loans consist of money that is lent to a home owner for the purpose of repairing the home, remodeling, or adding updates and additions to the property. These types of loans may be issued by institutes such as banks and mortgage companies, though they aren’t necessarily secured by the property itself. 

Since home improvement loans are typically short-term loans, they can sometimes be subject to higher interest rates and rapid repayment plans. These will depend on the contract between the lender and the borrower. Home improvement loans are generally favorable for the borrower, as they often result in an increase in the home property value. 

However, home improvement loans can also lead to various legal issues, especially if the borrower is unable to keep up with monthly loan repayments.

What Are Some Common Home Improvement Loan Disputes?

Home improvement loan disputes generally revolve around repayment issues (i.e., late payments or defaults on a loan). However, they can also involve a range of different legal issues, including:

  • Fraud or scams: Loan fraud and home improvement loan scams have increased in the past decade. These may involve false documents, forgery, or misrepresentation of loan terms,
  • Breach of a Home Improvement Contract: The actual improvements are usually done by a construction company. This will involve another contract between the homeowner and the construction company, which can be subject to breach.
  • Zoning Violations: it also happens that a homeowner will take out a home improvement loan, and then finish work on their home, only to discover that the improvements aren’t allowed under city zoning codes. An example of this is adding a second story that obstructs a neighbor’s view.

Finally, legal issues can arise if the borrower uses the money improperly. What commonly happens is that a borrower might obtain a home improvement loan, but then use the money for things like personal expenses, shopping, vacations, etc. This can constitute a breach of contract, especially if the lender has specified that the money is only to be used towards property improvements

Again, this will depend on the specific provisions in the home improvement loan contract. While it is difficult to regulate whether the money is actually being devoted towards home improvement, many state laws prohibit such activity.

How Can Home Improvement Loan Disputes be Avoided? How Are They Resolved?

Disputes over home improvement loans can be avoided through careful planning and foresight from the homeowner’s perspective. Before taking out such a loan, the property owner should consider:

  • Whether improvements are necessary
  • Whether the loan can be repaid
  • Whether the improvements will increase the value of the property
  • Whether the lender is a legitimate, credentialed company or agent

Loan disputes can sometimes be resolved through personal negotiation between lender and borrower. They may be able to readjust payment rates if it means that the borrower will be able to continue payments. However, in some cases, a lawsuit may be necessary to compel the borrower to make payments. Or, legal action may be necessary if the lender has engaged in fraud, coercion, or other industry violations. 

In most cases, the remedy involves a monetary damages award to cover the party’s economic losses.

Do I Need a Lawyer for a Home Improvement Loan Dispute?

Home improvements can be very beneficial, provided that they’re handled correctly. If you have encountered any disputes or legal conflicts over a home improvement loan, you may need to hire a real estate lawyer. Your attorney can advise you on your legal rights and can represent you in court if necessary. An experienced lawyer may help you obtain a damages award if you’ve suffered economic losses due to the dispute.