It is a common understanding that your home is a castle that should make you feel comfortable and safe within its walls. However, if your home is not living up to the promise of comfort and safety, you can consider remodeling it to match your needs.
Despite the fact that a home improvement is an excellent way of adding the lacking value to your home, most homeowners are kept at bay by the exorbitant costs associated with a home improvement project. Are you one of such individuals? If you are, below are ways to finance your home improvement project.
1. Start Saving For Your Home Improvement Project
If you are not in a hurry to remodel your home and you are a disciplined financial manager, then we would recommend that you start saving for your future home improvement project.
Unlike most financing options, remodeling your home using your cash is a cost saving feature since you will not have to cater for the financial charges and other risks associated with taking a mortgage.
How do you start saving for your home improvement project? Since you would want to come up with a sound saving scheme, you may want to hire a home improvement expert to help you estimate the total cost you will need for your home remodeling project. Then, you can start saving till you meet the estimate.
2. Use Your Credit
Were you aware that you can use your credit card to finance your home improvement project? If you weren’t, here is the trick. As you know, that plastic card lets you purchase items when you cannot afford to pay upfront.
For this reason, if you lack adequate cash upfront, we recommend that you take advantage of your credit card to purchase those items that you will need to complete your home improvement project.
Besides letting you buy building items on credit, using a credit card can also be a cost saving option since you can receive a credit card discount or rewards on every dollar you spend. While using a credit card, however, you should remember that credit cards have a high-interest rate than most forms of financing.
As such, you should make sure that you pay your credit each month to prevent your credit from accruing the prohibitive interest rates.
3. Get a personal loan
Do you have an excellent credit score? If you have it, then you should consider applying for a personal loan to finance your home improvement project. We recommend taking a personal loan since it does not require a collateral and it has flexible repayment terms. Moreover, if you have a good credit score, you may stand a chance of receiving a personal loan at a low-interest rate.
Despite the fact that a personal loan seems like an attractive way of financing your home improvement project, there are relevant considerations you ought to consider before taking this loan.
Firstly, you should remember that the affordability of this loan depends on your credit score. For this reason, a personal loan might not be a good option if your credit is poor since its interest rate will be as high as that of a credit card.
Secondly, personal loans have a fixed repayment term. As such, you should make sure that you repay the loan within the stipulated time to avoid getting into the wrong side of the law. Finally, you should know that paying your loan before a certain date might result in an extra fee.
4. Use a Home Equity Line of Credit
An HELOC is a loan in which a lender gives you a sum of money using your home’s equity as collateral. Unlike a home equity loan, the lender does not give you the entire amount upfront, and its interest rate is variable.
You may want to consider this form of financing because of its lower interest rates than those charged by credit card companies, and its revolving nature gives you the freedom to repay your loan without the struggle against time. Furthermore, this form of financing is tax deductible, and it can improve your credit if you repay your loan as expected.
Before you apply for an HELOC, it would be critical to understand that you could lose your home if you default, the loan places you at a high risk of accumulating your debt, and its variable rates makes it hard to predict your bills.
5. Use a home mortgage
A home mortgage is a popular way used by most people to finance their home improvement projects. You might want to consider a home mortgage for your home improvement project because it’s extended repayment period which lets you settle your loan without a struggle, the mortgage is tax deductible and its interest rate is lower than that of credit cards and personal loans. Moreover, you can refinance the mortgage just in case you had earlier taken one.
Just like any loan, a home mortgage has setbacks that you need to know before you apply for the loan. For instance, you might lose your home if you default the loan, a mortgage lets you carry an enormous burden over a long time, and the total amount that you pay back is more than you borrowed.
6. Home Equity Loan
This loan lets you borrow a certain sum of money using your home’s equity as the collateral. Unlike the Home Equity Line of Credit, the lender gives you the entire amount you requested, letting you clear your home improvement bills with one check. Financial experts recommend a home equity loan because of its lower interest rates than those of credit cards, and the loan is tax deductible.
Furthermore, it is easy to qualify for a home equity loan even if your credit score is bad and the interest rates on a home equity loan are tax deductible. However, you should be aware that you can lose your home if you fail to settle the loan on time and it places you at a risk of over-borrowing.