How to Pay for Home Renovation: 6 Home Improvement Financing Options


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In 2017, American homeowners spent over $6,600 on home improvement costs. While this may not seem like much money to some people, for others, it’s well beyond what they have in their savings account.

But sometimes, a home renovation is a must. Whether you need more living space or there are things falling apart, your home improvement project probably can’t wait any longer.

If you’re strapped for cash but need to get started on revamping your home, here are 6 home improvement financing options you can consider.

1. Home Equity Line of Credit (HELOC)

A HELOC is similar to a refinance, but it doesn’t borrow against the total value of your home. Instead, it lets you open a line of revolving credit of around 80% of your home’s value (with your home loan subtracted).

How do HELOCs work? Well, they have two phases.

For the first decade or so, you’ll be in the draw period. This is when you can use the money you’ve gained through your line of credit. When you make monthly payments, it mainly covers the interest, maybe some of the principal.

The second phase is the repayment period. This phase lasts around 15 years and you’ll probably be making higher payments than in the draw period since you have to pay more of the principal.

Do note that the interest rate isn’t locked and can fluctuate during your repayment period.

2. Home Equity Loans

This is similar to a HELOC, but you don’t open a line of credit. You just get a lump sum based from your equity.

Home equity loans work like mortgages do since they have the same tax benefits, but no closing costs. Since you get a lump sum, you’ll be able to start your remodeling project with no issues. With a home equity loan, you’ll pay off the total in a span of 15 to 30 years.

The interest rates can be higher than those of mortgages, but they’re not always higher than the rates from HELOCs. The main benefit is the interest rate is fixed. That way, you know exactly how much you’re paying over the next three or so decades.

3. Credit Cards

While most people advise against making large purchases on credit cards, it can actually be a viable option if you are certain you can repay the amount borrowed in a timely fashion.

For example, many credit card companies offer 0% interest rate for the first year or year and a half. You could sign up for a new credit card and charge all your home renovation costs on it. Then, pay off your entire balance before the introductory period is over with.

If you go this route, it’s imperative you pay off everything as soon as possible. When the introductory period is over, interest rates can shoot up to over 30%, which can be devastating to pay back if your balance is still very high.

4. Use Your Savings

Over the years, you may have put a little of each paycheck into your savings account. The funds for this might be intended for an unexpected medical expense or for part of your retirement fund. Whatever the reason, you might not be ready to touch the money in that account yet.

But when it comes to a home renovation, it may be wise to take from your savings and replenish it, rather than take out loans. When you use the money you already have saved up, you won’t have to worry about monthly payments and interest rates.

Regarding investments, you may want to consult with a professional before you make withdrawals; there may be penalties associated with doing so. They can advise you on the best course of action to take to minimize those fees.

5. Online Installment Loans

Online installment loans are loans you can get almost instantly. The great thing about this type of loan is that not only do you get the money you need quickly, but you also don’t need to go through a credit check.

In fact, you can have no credit (or bad credit) and still get approved for online installment loans. To get approved, you just have to have a US bank account and prove you have the means to repay the amount borrowed.

Once you apply, you’ll get a response within a few seconds. Then, you’ll receive the money by the next business day. Your repayment period will be every few weeks or month, so you’ll have plenty of time to get together the cash you need to make your payments on time.

If you want to know more about online installment loans, this helpful page explains more.

6. Personal Home Improvement Loans

If you don’t want to use your home’s equity or use it as collateral when borrowing money, a personal home improvement loan may be an option to consider. These don’t require you to put up collateral, which can be a huge burden off your shoulder.

However, to make personal home improvement loans a viable choice, you need to have good or excellent credit. While you can get approved with bad credit, the interest rates will be sky high.

These loans will also have shorter repayment periods than with the home equity options. With those, you get decades; with this, you get maybe 5 to 7 years. Because of this, the monthly payment amounts will be larger.

Explore Your Home Improvement Financing Options

With these 6 ways to obtain home improvement financing, you have a good amount of choices to get the funds you need for your remodeling project. So if you’ve been stressing out about getting the money to make improvements for your home, hopefully, these options should relieve some of that anxiety.

If you’d like to browse options for bedding after you’ve remodeled your home, check out the “buy now, pay later” section of our site.