What Are Cost-Effective Ways To Pay For Home Improvements?

by Denise Mason 04/06/2022

While qualified borrowers often like to have choices, having too many funding options can get confusing. If you are considering borrowing money to upgrade your home, here are a few things to consider.

How Do Home Improvement Loans Work?

It’s essential to understand that the term “home improvement loan” is not precise. This type of borrowing typically involves packages that range from traditional loans to lines of credit. What these sometimes vastly different opportunities have in common is they are used to make property upgrades. This may include emergency roof repairs to transforming a home into an open floor plan.

So-called home improvement loans can be broken into two categories — secured and unsecured. Secured loans involve those borrowers leverage collateral to secure. Unsecured loans, as you might suspect, are offered without collateral. It’s not uncommon for unsecured products to charge higher interest because the lender takes increased risk.

What Are The Best Home Improvement Loans?

Each type of home improvement product offers a different structure for qualified borrowers. The terms and availability of home improvement loans are largely driven by items such as credit scores, equity and debt-to-income ratios, among others. The following highlights how the commonly secured home improvement loans work.

  • HELOC: A Home Equity Line of Credit ranks among the preferred secured loans. Based on the equity property owners have built up, the secured amount can be employed. Borrowers use the loan option much like a credit card and withdraw funds as needed. This proves cost-effective because homeowners can take out only the funds they require and typically enjoy flexible repayment options.
  • Home Equity Loan: Sometimes referred to as a “second mortgage,” this option provides a lump sum to make upgrades. Often used to remodel a home, these secured products rank among the low-interest options available to qualified homeowners.
  • Credit Cards: Unsecured funding options usually come with higher interest rates because lenders take a greater risk if a default occurs. Although employing a credit card or similar unsecured option can result in paying excessive fees, fast repayment can minimize cost. It’s not uncommon for homeowners to apply for these lines of credit from retailers that sell building materials. Many offer zero interest for a set number of months. If you can meet those terms, credit cards can function just like cash.

Homeowners would be well-served to consider interest rates, fees and repayment terms when selecting a home improvement loan. Perhaps the key involves choosing an option that cost-effectively fits your needs.

About the Author

Denise Mason

Hi! I'm Denise Mason. WELCOME to my Website! Being a full-time REALTOR® gives me the opportunity to assist in achieving your wants, desires, needs, and priorities in selling or finding a home. My goal is to take care of my real estate clients by providing an exceptional, no drama experience that you not only deserve but should demand in the hectic and competitive marketplace of today. I work closely with you throughout your entire real estate transaction. I work to be your family REALTOR® for life. Success begins and ends with good communication. I love what I do and do what I love! I am positive, enthusiastic and truly enjoy people and the real estate business. My commitment to you, my client extends far beyond a single transaction. My goal is to communicate, educate and exceed expectations! As the daughter, wife, and mother of active duty and retired service members, I've had numerous relocation experiences; renting, buying and selling a home. I grew up in Arlington County, VA and lived there for more than 20 years. Upon my husband's retirement from the Army we could think of no better place to call home than Virginia, the place of our childhood. I have been a Prince William County resident since 1997. We have raised and educated three children in the Prince William County School system. My family is my pride and priority which makes me no different than you or any other individual who wants a safe and comfortable environment for yourself, family and friends. I look forward to helping you achieve your real estate goals. Call me at 703-283-0969 or email me so we can meet over tea or coffee & I can get to work for you!