September 1, 2015 in Loans

It’s fun to imagine how you’ll use a new space in your home, but understanding the specifics of your financing options can help you reach a decision that’s as good for your pocketbook as the renovation is for your home.

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This shows what’s needed when using these methods to pay for a home improvement project.

And will you need a loan to complete your remodeling? Better get a free credit score first at myBankrate.

Different ways to finance home improvement

Home equity loan

  • Has upfront costs
  • Complex approval process
  • Requires collateral
  • Has tax benefits
  • Monthly payment; fixed rate

HELOC

  • Has upfront costs (frequently waived)
  • Complicated approval process
  • Requires collateral
  • Has tax benefits
  • Monthly payment; variable rate

Refinance

  • Has upfront costs — often hefty
  • Complicated approval process
  • Requires collateral
  • Has tax benefits
  • Fixed-rate payment

Credit cards

  • Have no upfront costs
  • Straightforward approval process
  • Do not require collateral
  • Have no tax benefits
  • Monthly payment; variable rates

Store credit cards

  • Have no upfront fees
  • Simple approval process
  • Do not require collateral
  • Have no tax benefits
  • Monthly payment; variable rates

Borrow from 401(k) / IRA

  • Possible upfront costs
  • Complicated approval process
  • Does not require collateral
  • Has no tax benefits
  • Payback schedule varies (at least 1 payment per quarter)

Borrow from life insurance

  • Possible upfront costs
  • Complicated approval process
  • Requires collateral
  • Has no tax benefits
  • Payback terms vary

Personal loan

  • Possible upfront costs
  • Approval process varies
  • Normally does not require collateral
  • Has no tax benefits
  • Monthly payment; fixed rate

Title I

  • Has upfront costs
  • Complicated approval process
  • No collateral required up to $7,500; required for higher amounts
  • Has tax benefits
  • Fixed-rate payments
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