Are you interested in taking on a home improvement project? Are you excited about moving forward, but caught up on the financial side of things?
There’s no right or wrong way to pay for a home improvement project, but some methods are probably better for you than others. And that’s why you need to compare all your options before deciding how to proceed.
Below are five of the most common ways to pay for a home improvement project.
1. Cash
Depending on how much cash you have in the bank, this may be the best option. Here’s why: you’re not going into debt to pay for the project.
Keep in mind that you may not want to use all your cash for a home improvement project, as that’ll leave you financially susceptible in the event of an emergency.
2. Credit Card
The primary benefit of a credit card is ease of use. All you have to do is pull out your plastic, hand it to your contractor or supplier, and complete your purchase.
Conversely, there are some potential downfalls of using a credit card, such as a high interest rate.
Before you use your credit card for a large purchase, create a plan for paying down the debt in a timely manner.
3. Personal Loan
As an unsecured loan, this allows you to borrow the money you need for your project without any collateral.
However, since the loan is unsecured, you should expect a higher interest rate.
4. Home Equity Loan
As the name implies, this allows you to borrow money based on the equity you have in your home.
On the plus side, since it’s a secured loan, you can secure a more competitive interest rate (when compared to a personal loan).
But don’t forget this: you’re putting your home at risk in the event that you default on your loan.
5. Mortgage Refinance
With a cash out refinance, you can refinance your mortgage and access cash for a home improvement project at the same time.
Remember this: you roll the money you borrow for your project into your new mortgage, which increases the balance and monthly payment.
Final Thoughts on Paying for a Home Improvement Project
No two projects are exactly the same, so make your decision based on your financial circumstances and the details of the project you’re tackling.
When you make a confident final decision in regards to how you pay for your home improvement project, you’ll feel more comfortable with the impact on your budget and future.
What was the last home improvement project you took on? How did you pay for it?
