Homeowners Unite: 4 Ways to Finance a Home Improvement Project

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If you want to remodel some elements of your house and your wallet isn’t packed with cash, selling your home isn’t an option. Here are a few smart ways to finance your home improvement project that won’t break the bank but will make your place cosier and more modern.  

1. Borrow from your retirement plan

One of the most popular ways to find cash is to borrow it from yourself. Unless you urgently need to improve your home, borrowing from your retirement plan is a terrible idea. Besides the IRS pains and penalties, you’ll need to work extra hard to repay the amount of cash you’re going to borrow in less than 5 years. On the other hand, borrowing from your retirement plan has its perk like a reduced interest rate. However, it might be tempting to postpone your repayment and so you risk ruining your retirement plan.

2. Save up

Saving cash until you’re able to pay for the construction work is probably the best way to finance your home improvement project. Not only will it eliminate all the financial charges and responsibilities from your life, but you’ll also save your retirement plan. However, saving requires time and patience. If your house is old or it has bad living conditions, it could be hard to save enough to reconstruct it, as the average amount of money required for a home improvement project could reach up to $20,000. Even if you sell unnecessary stuff at home, you can’t save such amount in a month.

3. Open a credit card

If you manage to find a zero percent credit card and you’re sure you’re able to pay back the balance, consider using this way to pay for your home renovation. Be ready to pay off your debt as soon as possible because credit cards come with high-interest rates after a zero percent period. Generally, credit cards give their clients a year or a year and a half to pay off the balance without interest. So aim to pay double or even triple your monthly payments.

4. Go shopping for loans

With a host of loan lenders, finding the cash for your home improvement project might not be a problem at all. The downside is the high rates that usually range from 3% to 6% of the initial sum. If you go shopping for loans, you may stumble across different loan options, such as home equity loans, installment loans, and peer-to-peer loans. These are the faster loans than the ones from traditional banks, but some may require higher monthly payments. Some of them offer low-interest rates. Anyway, ensure you can really afford those monthly payments and find out all the details before borrowing money from loan lenders.

There are many ways to finance your home improvement project, but don’t run into debts without proper considerations. Whether you’re going to borrow from your retirement plan or a loan lender, check out all the details and information to find the best deal.

 

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My Life, I Guess... is a personal finance and lifestyle blog started by Amanda back in 2013. She strives to keep the "person" in personal finance by writing about money, mistakes and making the most of it.

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