How to finance your home improvement project
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How to finance your home improvement project

In our last article, we gave you some handy pointers on how to save money while you spruce up your home. Today, we’re going to have a look at the methods you could use to actually fund your renovation work.

Before you take your pick of the following options, you’ll first need to determine the scale of the project, its expected completion period, and how much it’s going to set you back financially. The suitability of each funding source relies on these factors.


The simplest, fastest and most fuss-free method. With cash, you won’t have to deal with debt, interest rates, credit history checks, troublesome paperwork, loan fees and any other miscellaneous costs. That means you’ll know exactly how much you’ll need to spend right from the start.

On the flipside, paying with cash may mean dipping into the savings which you might have set aside for a rainy day. You’ll have to ask yourself if you’re willing to take that risk. For most of us, paying with cash is only realistic for small scale projects with equally small costs.

Credit card

When you can’t afford or don’t want to pay with paper, plastic may be the way to go, especially with medium scale home upgrading work. Credit cards work especially well for projects that require regular expenditure on an extended basis. You can keep charging your card as needed so long as you manage to pay off most of your bill before each fresh swipe.

Credit cards also allow you to accrue reward points and enjoy cashback rebates as a bonus. Furthermore, you won’t have to put down any of your assets as collateral.

However, if you incur any credit card debt for the purpose of home improvement, you’ll need to be certain that you’re able to repay it on time. Emergency credit card use may hamper your ability to meet your bills. Credit cards are notorious for their high interest rates and you don’t want to be stuck with those.

Personal loan

Just like credit cards, you won’t need to put down any collateral for this funding method. Unlike credit cards, however, you’ll be subject to a credit history review. A personal loan can be used to pay off small to medium-sized home renovation projects.

If you qualify for one, personal loans may offer better interest rates than credit cards. You’ll also be able to negotiate with your bank a repayment plan that you’re fully comfortable with. Take note though: If you want to pay off your personal loan ahead of schedule, you might be charged a penalty fee based on the amount of interest lost to the bank. This isn’t an issue you’ll face with credit cards.

Home equity loan

This funding method is best for large scale home renovation projects that are expensive and long-drawn. Because you’ll be committing your property as collateral, a home equity loan offers the best interest rates among all the external financing options provided here.

While the relatively lower interest rates and wide margin of financing may make this avenue highly attractive, you’ll also have to be extra disciplined and diligent when it comes to repayment. Remember, you’re basically surrendering some level of your home’s equity to the bank – default once too often and you run the risk of losing it!

In a nutshell…

Cash, credit card, personal loan and home equity loan. There’s no one size fits all when it comes to choosing among these financing options for renovating your house. Whichever you go for, just make sure that it suits your needs the best, and that it’s a commitment you’ll be able to follow through. Repayment penalties never come cheap.

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