The Different Ways To Finance Home Improvements

The home improvement project you have been dreaming about can become a reality with the help of one of the many ways for financing it. We have put together a list of the different ways to finance home improvements. These are described in a basic way, but with enough detail to help you understand if one of these ways is right for you.

The Home Equity Loan
This method requires a complex approval process, and it requires that you have enough equity in your home to meet the lender's guidelines. These loans always have upfront costs. It does have some tax benefits. The monthly payment is fixed as is the interest rate.

Refinance Your Home
Often this method has some high upfront costs considering the amount of money you probably need to borrow. The approval process is complicated and burdened with documentation. Of course, you must have enough equity in your home to be able to borrow against it. The amount will vary with lenders, but generally, you cannot borrow more than a total of 80 percent of your home's value. This method offers a tax benefit.

Use Credit Cards
There are no upfront costs involved with the use of credit cards, and the approval process is usually straightforward. Collateral is not required. The monthly payment is fixed, and it may be on a declining scale. The interest rates are often variable and can be high.

Store Credit Cards
The stores where you can purchase the materials for your project may offer credit. This method has a simple approval process and no upfront fees. You will not be required to have collateral. The monthly payments work very much like the credit card payments. The interest rates are variable and can be high.

Borrow From Your 401(k)/IRA
These methods can take time and can become complicated depending on where your funds are deposited. Collateral is not required. Some of these loans require an interest payment that is actually made to yourself. The length of time allowed for paying the loan back can be substantial. There are no tax benefits. The major drawback to using these funds is they are not working for you when you borrow them. This means that the money you borrow does not have a chance of continuing to grow.

Borrow From Your Life Insurance
This can be a complicated process with upfront approval costs. The payback terms vary depending on the life insurance company The amount of equity in the policy will be used as collateral, and the guidelines for this requirement also vary.


Obtain A Personal Loan
There can be minimal upfront costs. The approval process is largely dependent on your credit and the amount of the loan. This loan does not usually require collateral. The monthly payment and the interest rate are fixed.