Should I Use Financing to Pay for Home Improvement Projects?

Home improvement projects can be a fun task, and can completely transform the entire look of your house. The downside to any home improvements is the cost. Even if you save labor fees and take on certain projects yourself, you are still looking at thousands of dollars to pay for materials alone so it pays to do your research and get numerous construction quotes before buying. Due to the extensive costs of home improvement projects, many people choose to finance them so that they can afford it. There are a few ways to achieve financing, but you should also ensure that you can afford the extra overall costs and that a particular project is truly worth the money and effort.

Personal Loans and Refinancing Options

Financing through personal loans is perhaps the easiest way to get the money that you need for a particular home improvement project. These can be in the form of loans from your local bank, or those form a larger corporation that specializes in this type of financing. Another option is to use an existing credit card or to open a new one in order to pay for your project.

The primary benefit of using personal loans and credit cards to pay for home improvement projects is that they are relatively easy to take out. You generally have to fill out paperwork detailing your income and your credit history, but some companies might only request your basic personal information. If you have poor credit, there are certain companies that might be more willing to work with you, so long as you have the income to repay the loan in the required installments. Most companies offer options with relatively low monthly payments.

Despite the ease of taking out personal loans, this method does possess some downsides. The primary concern with credit cards and loans is that the interest rates can be high, especially if your credit is not perfect. This can make a seemingly simple home improvement project a hefty investment.

Mortgage refinancing is an increasingly popular alternative to personal loans for home improvement projects because the interest rates are significantly lower. If you are looking to use this type of financing as a way to afford home improvement projects, the mortgage company will first look at your financial situation in order to determine any risk involved. A set amount of money is added to your mortgage, and then you are cut a check for the difference. This can range from at least $10,000 or more. The downside to this type of financing method is that you will have to pay for your mortgage for many more years if you plan to stay in your current residence.

Assess Your Situation

Before you decide whether you want to finance any home improvement projects, you must first figure out whether you can truly afford them. Although financing allows you pay back the costs overtime, there is no avoiding the fact that this will ultimately convert into an extra expense for you and your family. Instead, you might consider planning well in advance and saving money in a money market account so that you can pay cash for your projects.

Another consideration is what exactly you plan to get out of any home improvements. If you desire to increase the value of your home so you can resell it, you might consider shopping around first to see whether renovations are necessary for you to make a profit off of selling your house. If you are using contractors for home projects, shop around for the best prices and find professionals that do not skimp on quality work.

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