How Should I Pay for a Home Improvement Project?

Undertaking a home improvement project can be a good investment if it’s something that will add long-term value to your house. However, most significant projects require a hefty contribution from you in terms of both your time and money. You should always shop your project around for quotes in order to get good value out of your project (and, remember, the cheapest quote isn’t always necessarily the best choice!) but once that decision is made, there’s also the question of how to pay for it. Here are some options:

Pay in cash. This is the ideal way to pay for your project because you won’t be paying for it for years to come. If you’re thinking of making an improvement to your house in the next year or so, start saving up now. Savings accounts are paying very low interest rates right now and if you’re nervous about the stock market, an upgrade to your home can be a good use for your extra cash. Not only will you hopefully see a monetary return on your investment down the line when you go to sell your house, but you’ll also benefit from enjoying your upgraded home in the meantime!

Tap your home equity. This is much more difficult to do these days, but if you have enough equity in your home, you may be able to approach your bank about a low-cost financing option like a HELOC (Home Equity Line of Credit) or Home Equity Loan. These may be good options if you don’t have a lot of cash on hand (or do but prefer to have access to it in case of an emergency) and are sure you can handle an increase in payments to your monthly budget.

Take a personal loan. A personal loan typically has higher rates than home equity loans because they are unsecured (you’re not offering up any collateral in case you can’t pay it back). The rates should definitely be better than a credit card, however, so it is an option you can explore if you don’t have much equity in your home.

Just remember that although many home improvement projects do add value to your home, it’s not guaranteed and they may take time to pay back. Make sure you can afford any upgrades you’re considering!

The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.

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