Everyone wants to have a beautiful home. Considering that it is probably the biggest purchase of your life and where you spend the most time, it’s easy to see why home improvement is such a big business. Unfortunately, it’s rarely cheap. Even remodeling a tiny bathroom can set you back several thousand dollars or more. So let’s take a look at the different options out there to pay for these improvements.
Home Equity Line of Credit: Known as HELOC for short, this is a line of credit which uses your home’s value as collateral. Because it is secured by the equity in your home, typically this type of loan has interest rates which are less than a non-secured loan (like a credit card). If you’re looking for 10 to 50k in financing, this is one way to go.
Refinance: Just like the name implies, this is where you replace your current mortgage with a new one. This benefits the consumer in a couple ways. First of all, if you can refinance to a lower interest rate, this in itself may be hundreds less than your current monthly payment. Secondly, if you got a mortgage years ago, a refinance allows you to cash out that equity you’ve already paid for – money you can use for whatever you want, including home remodeling.
Credit Cards: Most of the time, this is not a good idea. However, if you have the means and discipline to pay off the balance quickly (within 6 to 12 months) this is an option to consider. Why? Because a number of credit cards have 0% offers on purchases. Bank cards are more likely to offer you better deals for this, but there are also store cards like the Home Depot credit card which sometimes offer 0% promotions for up to 6 months. If you decide to go this route, be sure to use comparison tools like credit card reviews and ratings to find the longest offer possible.
Personal Unsecured Loans: Similar to a credit card, these usually aren’t available for high-dollar amounts since they’re not secured by collateral. For the same reason, they also typically carry high interest rates. Therefore, this is rarely (if ever) a good way to finance anything, let alone an optional home improvement project.
Payment Plans: Large stores like Home Depot and Lowe’s don’t offer this, but some local mom and pop stores sometimes still offer payment plans to customers they trust. If the interest rate is reasonable, this is definitely a good option to consider. However due to the recent economic problems, it will be especially hard to find stores that offer this.