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Homeownership is an investment, but it’s not just an investment in the price of the property – there are many bills and expenses on top of the cost of the home. These could include refurbishment, and a new bathroom or even a new air conditioning unit.

You might be interested in renovating the kitchen to increase the value on resale or perhaps you just want somewhere that’s nice to live for you and your family.

Regardless of what you do, home improvements can be a big expense, and sometimes you need to turn to external financing to make sure this can happen. One of the biggest questions is how can I finance my home improvements?


Statistics and Facts

  • In 2021 Home improvement sales in the US reach $538 billion
  • 80% of homes in the US are older than 20 years and so typically require remodelling when they hit this age
  • 2018 figures show that the cost to remodel a kitchen was around $14,000
  • A survey from Statista showed that 76% of people did something to their home during the COVID-19 pandemic


Should I Borrow Money For My Home Improvement Project?

Financing a home improvement project can become very expensive very quickly. If you think that you don’t have enough money in the bank to pay for this, then there are many options for financing your home improvement.


Take It Out Of Your Savings

Typically we find the most common way to finance your home improvement project is to use your existing savings. Figures from the census bureau shows that 76% of people who undertake a home improvement project finance it through their own personal savings.

If you don’t currently have a large chunk of money saved for home improvements, then the first port of call could be to look at your own personal budget. If it is important to you then create a pot in your savings specifically for this. It might take a little bit longer to complete the project, but it will mean that you financed it out of your own pocket and not had to take on debt for this.

Of course – the amount you need to save will depend on what type of project you want to undertake. If you want to finance a brand new bathroom, kitchen, and living room, then you might not be able to pay for this out of your savings. If this is the case then it might be worth starting small with a part of your house before moving on to everything else. This will ensure you keep down debt and do not eat into your savings too much.


Home Improvement Loan

A home improvement loan is a specific type of loan that can be used to improve your house. Credit unions, some online lenders, and banks offer this type of loan.

A home improvement loan is an unsecured loan and so you won’t need to use your house if collateral or equity to guarantee the loan. Typically this type of loan is agreed upon quickly and you can get the money in your bank account the same day or within 24 hours.

You are able to apply for any size home improvement loan, but what we typically find is that people borrow between $100 and $35,000 for their first project. When looking to borrow money, lenders will take into account things like your financial history, your income, and your credit score. Unlike banks, some online providers can offer loans for people with bad credit histories who want to fix up their homes. This means you don’t need perfect credit to borrow money from these online lenders.


Credit Cards

Many American households will finance part or all of their home improvement through a credit card. Credit cards have a high APR and so you need to make sure that you’re able to pay back the amounts that you’ve borrowed month by month so as not to go into debt.

If you can’t make your credit card repayments, then this will impact your credit score and credit history and make it less likely that you’ll be able to get a loan in the future.


Buy Now Pay Later

Another alternative to using your credit card is to buy things through Buy Now Pay Later (BNPL). Many online retailers offer this service which allows you to space payments out over a certain period of time. This could ease the financial pressure on your account and allow you to buy what you want for your home improvements.

You’re probably already a homeowner if you’re doing home improvements to a house that your own and so your credit score should be ok.


Richard Allan

Richard Allan

Richard Allan is the founder of Capital Bean and a passionate writer about personal finance, budgeting and how to save money at home and work.

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