Five Ways to Finance Your Home Improvement Project
1. Home Equity Line of Credit
When you get a home equity line of credit, you’re using the equity of your home to open up a line of credit that you can use as needed. You don’t have to withdraw the full amount of money from your line of credit, and you only need to pay interest on the money you’ve withdrawn. This makes it an ideal way to fund a home improvement project like a renovation, when you might not know just how much the project will cost.
2. Home Equity Loan
On the other hand, if you do know how much your home improvement project will cost, you might want to look into a home equity loan. These loans are like other loans, including having a fixed interest rate as opposed to a variable interest rate, but you can probably get a lower interest rate, since you’re using your house as collateral.
3. Personal Loan
If you don’t want to use your home’s equity as collateral or don’t have enough equity in your home to do so, you might consider a personal loan for your home improvement project. Personal loans are typically at your bank or lender are easy to find, as many banks, lenders, and credit unions offer them, including your bank or lender.
Personal loans aren’t backed by your home or another asset, making them unsecured loans. Your interest rate will depend on your credit score and history, and the higher your score, the better chance you have at getting a lower interest rate. But just like a mortgage or other large loan, it’s a good idea to compare rates from a few lenders. If you have a strong credit score and would prefer a quick payout, a personal loan could be a great option for financing a small to midsize home improvement project.
4. Credit Card
While you don’t want to use your credit card to fund most home improvement projects, you might want to think about it if your project is small. For smaller projects like replacing bathroom tiles, as opposed to your whole plumbing system, you might consider financing with a credit card. Many credit cards offer low-to-no interest rates for the first few months, so if it’s a project that you can pay for in just weeks, you could possibly avoid owing any interest at all.
One other perk of using a credit card is the potential to earn rewards. If your credit card offers great cash-back or points for your spending, this could help you reap those benefits. Click the link below to view a credit card option.
5. Cash
If you want to avoid dealing with loans, fees, interest, and more, you could opt to pay for your home improvement in cash. This option may only make sense for smaller projects. (Another alternative: You might choose to pay for a portion of your home improvement venture in cash from savings.) Either way, paying out of pocket can help eliminate the extra costs that come with a loan or refinancing, which may help you stay within your budget. Getting cash from savings in a savings account can help you get there faster.