Maybe you’ve been planning on finishing your basement or upgrading your plumbing for a while now. You have a little extra leeway in your budget and you finally can think about tackling some of those home improvement projects you’ve been putting off. Or perhaps you don’t have a choice. Maybe a tree fell on your roof in last night’s lightning storm.
Either way, home improvement can be costly, and you need to figure out the best way to finance your projects.
You have a lot of options when it comes to financing home improvement. Here are a few of the best ones to consider:
• Cash. If you have a smaller project, then you should probably aim to pay it all out of your own wallet directly. Cash will save you from interest and fees on loans.
Of course, it may not be a viable option for a bigger project like a kitchen remodel. For projects that will cost you tens of thousands of dollars, you will probably need to borrow.
• Low-interest credit cards. These unsecured loans are a great choice for low- and medium-cost projects. They are easy to qualify for and you can get away with paying low interest or no interest. Just make sure you know all the card terms so you won’t run into unexpected snags.
• Personal loans. When it comes to mid-priced projects, unsecured personal loans are a good choice. They are easy to qualify for and you don’t need to provide any collateral. You can get a larger loan this way than you can through a credit card and its easy to apply online with online lenders like SoFi.
Interest rates do tend to be high, though, so be sure to compare personal loan interest rates before you commit. Shopping around for the best deal can be time-consuming, but it will pay off in huge ways over the years to come.
• Get a loan tied to your home. Secured loans like home equity loans, home equity lines of credit and cash-out refinances work great for more expensive projects.
They typically offer low interest rates and may also offer tax advantages. Each of these different types of secured loans has its pros and cons, so be sure to do a thorough examination of your options before you make your choice.
Home improvement projects sometimes cost only a few hundred or thousand dollars. Other times, they may run you tens of thousands of dollars or more.
For smaller projects, when you can get away with cash or a low- or no-interest credit card loan, do it. You will simplify your budgeting and your life while keeping costs as low as possible. For larger projects, you might consider a personal loan or a secured loan tied to your house.
Always make sure that you will truly be able to afford any project that you are thinking of tackling. Do the long-term math to figure out where you will stand with any loans you are considering taking on. If you feel like you are on shaky financial ground, it is always best to wait. You can always upgrade your home tomorrow!