4 Home Improvement Financing Options You Need to Know Before You Start

When it comes to home improvement or renovation, the loan options available to finance can be a bit mind boggling.

There are some important differences to be mindful of when it comes to your decision, and often depends on your individual circumstances.

Whether you decide to go with a secured loan such as a home equity line of credit (HELOC) or an unsecured loan type, you have several choices when it comes to funding a home renovation. This article will provide a quick overview of some common loan types, how they are structured and what to consider before you select the right option for you.

1.Credit Cards

Credit cards can work for smaller home remodeling projects, such as a fresh coat of paint or new bathroom vanity. But funding larger scale projects, such as a new kitchen or bathroom can be devastating to your credit and your long-term costs.

Cons of Credit Cards:

1. With interest rates between 15%-24% APR, you’ll pay much more in the long run if you aren’t able to pay off the card quickly.
2. Carrying a high balance on your credit card may negatively affect your credit score.
3. If you use a retail credit card, the interest rates can be even higher.
4. If you have surprise expenses during the renovation, and max out your card(s), you will have a difficult time getting a new loan based on the high balances.

You may also find that retailers encourage financing your home renovations on their store credit card, which sounds convenient if they include a special upfront rate, but be careful because store credit cards carry even higher interest rates than bank cards.