Like most things you purchase, your home requires constant upkeep in order to remain livable and comfortable. When you’ve spent some time in your home, it can face structural and cosmetic damage that requires upgrading or replacements to be improved. Such renovation projects, although valuable, are expensive. As the average homeowner doesn’t have thousands of dollars in an account to dedicate to the project, they turn to financial options like these listed below:
Home Equity Loans
If you’ve lived in your home long enough and have been paying regularly on your mortgage, you have an option to borrow on that equity to pay for renovations. Companies like Eagle Home Mortgage offer eligible homeowners home equity loans to use for personal purposes. The application process is much like applying for a personal loan.
Home equity loans are a little easier to qualify for than a personal loan. Since your home would serve as collateral, the lender takes less of a risk in providing you with the funds.
Failure to repay home equity loans, however, could result in further collection fees and processes. It could potentially lead to harsh consequences like a foreclosure.
When you need to buy anything that is beyond your means, one of the first places to turn is to financial institutions to borrow the money. Since personal loans can be used for anything, they are often the most commonly applied for. With approval amounts ranging from the low hundreds to the high thousands, and ample timeframes to pay off the balance, eligible applicants can get the cash they need within weeks to complete a project.
Personal loans can be applied for any purpose and are offered by financial institutions like banks and online lending companies. Applications can typically be filled out online and decisions are made within days. Depending on the type of personal loan you apply for and your credit standing, the interest rates are low and you have plenty of time to pay it off within your budget.
Personal loans often require you to put up collateral. They are also very costly to those who have less than perfect credit. Interest rates can be higher, repayment options are limited, and the amount you can receive is less.
Borrowing from Retirement Accounts
Most people have a retirement account through their employer. If they’ve been working with the company for long enough, they have the potential to apply for a loan on their savings account. Employees can borrow as much as half of what they’ve deposited with low-interest rates.
The attractively low-interest rates are one of the first benefits to applying for a retirement account loan. It is also good to point out that because you’re an employee, they do not typically run a financial background check as they can set up repayments through payroll.
Though most affordable and convenient, retirement account loans should be considered with caution. They must be repaid within a few years in full – interest included. Should you default on the payments, or become unemployed within that timeframe, the entire balance is due in full or you will be penalized with early withdrawal fees from the IRS and local government.
Another option used to cover the expenses of a home renovation is using credit cards. Credit cards can be convenient when you don’t have the money upfront to make the purchase. With various types to choose from, homeowners are able to cover the costs with one or more swipes.
Credit cards give you plenty of time to pay off the debt. When used correctly, they can also be convenient for building positive credit. With hundreds of products on the market, it is typically easy for people with excellent to fair credit to qualify for one.
Though credit cards can boost credit and give you time to pay off the debt, if you’re unable to do so within a reasonable time, it is best not to charge it. Interest rates can make a product or service cost several hundred dollars more each year and the longer you take to pay it off, the more debt you incur.
Home renovations can be expensive, yet sometimes necessary to complete. If you have the desire to improve your home or a household emergency that needs to be repaired, the above options can help you fund the costs. Remember to make an informed decision by weighing the pros and cons of each.