Homeowners around the country are looking to make the most of their houses, from simple home improvement projects to large-scale remodels. The National Association of REALTORS® (NAR) reported in 2019 that a whopping 74% of homeowners are more eager to return to their homes when restoration projects are completed. Even the most basic house upgrades, however, come at a cost.
Here’s how to finance your home improvement projects, regardless of size, scope, or budget.
Home Improvement Personal Loan
If you're looking to finance a small home repair project, a personal loan tailored to those expenditures may be the best option. For example, if you want to update your HVAC system or get new siding, this loan could help. Because loan rates normally range from 3 to 36 percent, you'll need to locate alternative financing for larger projects (Bankrate, 2021).
Banks, credit unions, and other financial organizations offer personal loan choices. The lender, and your financial position, including your credit score, will determine the interest rates, fees, payback terms, and allowed payout amount. To qualify, you'll usually need a credit score of at least 640, and interest rates often decrease as credit improves (Investopedia, 2021).
Home Equity Line of Credit
If you’re planning longer-term home improvements, like renovating multiple rooms in your home or completing a project whose scope or cost is variable, you may want to explore a home equity line of credit or HELOC. These open lines of credit allow owners to repeatedly borrow against their home equity as opposed to providing one payout in a set dollar amount. In other words, with a HELOC, you can borrow what you need when you need it, up to a pre-determined limit.
Home Equity Loan
If you’re more confident that you know just how much your planned improvements will cost, a home equity loan (HEL) could be right for you.
Interest rates are also typically fixed, meaning that monthly repayment amounts will not change over the life of the loan. Keep in mind, though, that your home will be up as collateral. In cases of default, you could potentially lose the property. These loans can also come with a wide range of upfront costs and fees, so you may want to shop around for the right option.
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