Loan Options for Home Improvement


Although unsecured personal loans as well as home equity loans are the most popular forms of home improvement financing, these are not your only options.

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Home Equity Line of Credit (HELOCs).

Home equity lines of credit are similar to home equity loans. You can borrow money with your home equity as collateral. A home equity loan is paid in one lump sum. However, a home credit line of credit allows you to access the same credit line over and over again during the draw period. A home equity credit line can be a better choice for home improvements projects that you don’t know how much will cost.

Home equity loans are variable-rate products. This means that the monthly payment and interest rate can change over the term of the loan. While home equity loans have higher starting interest rates than home equity credit, fixed-rate home equity loans could be more attractive for borrowers in an increasing interest rate environment.

Refinance with Cash-Out

You can refinance an existing mortgage with a cash-out refinance loans for a greater amount than what you owe on the home. The lender will pay you the difference as a lump-sum cash payment. The cash can be used for any purpose, including home renovations. A cash-out refinance, unlike a home equity loan and/or home equity line credit, will not affect the terms or rate of your primary mortgage loan.

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Channel says that a cash-out refinance can be a great way to obtain a lot cash. However, today’s higher interest rates make it less attractive than it was six to seven months ago.

You have two options when you apply for a cash-out refinance: you can work with your existing mortgage lender or you can find a new lender. To get the best rate, shop around with different lenders and make sure you include closing costs and fees in the calculation.

Credit card with 0% APR

You may be eligible for a credit card that offers 0% APR, if you have excellent credit. You could have up to 21 months to pay the balance off depending on which card you choose. If you are able to use the card strategically, a 0% APR card could help you save money. However, you should have a plan in place to repay the balance before the promotional period ends. You could be charged double-digit interest rates otherwise.

Remember that your credit card credit limit is limited so it may not be the best option for small home improvements projects that aren’t as costly.

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Government-Backed Renovation Loans

Some borrowers may be eligible for government-backed renovation loans. This gives them low-interest financing options. Although there may be more steps to go through and requirements, government loans can still be a good option if you are eligible. These programs include:

Title 1 Home Improvement loans: These Title 1 Loans can be obtained through the Federal Housing Administration (FHA). They are fixed-rate loans that can be used for renovations, repairs, and rehabilitation projects. Repayment terms up to 20 years are possible. Higher loan amounts, such as less than $7,500, can be secured, but smaller amounts, like under $7,500, can be made unsecured. The home is used as collateral for larger loans.

Section 504 Home Repair program: Section 504 Home Repair is available to homeowners with very low incomes. It offers loans to renovate or modernize homes and grants to seniors with low income to eliminate safety and health hazards.


You might want to delay completing your home improvement project if it isn’t urgent. Instead, build up your savings and pay cash for it.

Ask yourself: Is this something you need? Channel advises, “Or something I want.” You can look into financing options more aggressively if it is a necessity, such as your appliances not working. Take it slow if it’s a need. Consider: Is there another way to finance this other than taking out a loan?

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Make sure to think through all options and plan for renovations.

Channel advises that you don’t rush to get a loan. “Do your research. You might find a lower rate by shopping around. A home improvement loan is a great way to get rid of the problems in your home if you plan ahead.