Whether you just bought a fixer-upper or want to increase your home’s value, renovations require time, labor, and money. Many first-time homebuyers invest in home remodeling projects after moving into their homes. CNBC reported that homeowners can recoup up to 60 percent of their remodel cost when they are ready to sell their homes.

    Statista reports total sales for home improvement retailers in the U.S. reached $457 billion ‌in 2020. However, not everyone who wants to renovate has the cash to do so. Turning to alternative funding can help pay for your project. Let’s examine how to use these options prudently.


    Projects that will give you the best return on your investment include: 

    Changing a furnace to a heat pump: $17,747

    Garage door replacement: $4,302

    Replace house siding with stone veneer: $10,925

    Replace entry door: $2,214

    Vinyl Siding Replacement: $16,348


    What Are the Options?

    Like most Americans, you likely can’t fund a full renovation in cash. Your options may include:

    Personal loans allow you to borrow a lump sum for your project. Depending on your credit history, interest rates range from 6.40% to over 30%. The lower the rate, the more affordable the project becomes.

    The benefit of personal loans is they don’t require collateral like your home. This differs from home equity loans.

    The downside is personal loans tend to have higher interest rates, meaning you pay more in fees over time. If you choose this route, lock in a fixed rate if possible.

    When applying for a personal loan, compare offers from multiple lenders like LendingClub and Lightstream. Pay attention to origination fees and closing costs, which vary and increase the overall cost.

    If you have good credit, consider cards offering 0% introductory Annual Percentage Rates (APRs) on purchases for renovations. Depending on the card, this 0% period can last up to 21 months

    Make minimum monthly payments, and avoid paying interest on the balance during the 0% period. Essentially, the card acts as an interest-free loan.

    By accumulating $3,000 in charges for updates using a 0% card with a 12-month introductory period and paying $250 monthly, you can pay off the debt without owing interest.

    I recommend you pay off the entire balance before the introductory rate period ends. When the introductory period ends, regular variable interest rates kick in.

    Carefully read the fine print for fees and terms that could cause you to forfeit the 0% rate, like missed or late payments. Set reminders for key dates and stick to a payoff plan.

    Home equity loans provide mortgages for a fixed amount of money. You repay home equity loans over a set term with fixed monthly payments, just like a regular mortgage.

    The lender has the right to foreclose if the borrower fails to pay the loan as agreed. Lenders usually limit the amount borrowed to 85% of a home’s value with home equity loans. 

    Collateralizing your home for the loan often results in lower interest rates compared to other financing options. Missed payments will put your home at risk. Shop lenders and scrutinize all fees before committing.


    Remember: Use Funds Wisely

    When financing home renovations, borrow prudently. Interest and late fees quickly snowball into large debt.

    If you use a non-0% card, pay the balance on time and in full each month to avoid interest charges.

    If carrying existing debt, pay above the monthly minimums, reduce expenses, and consider consolidation if available. Eliminating current debt should take priority.

    Have a clear plan for the exact amount needed, how you’ll use the money, and your strategy for timely repayment. Avoid tapping credit for non-necessities until renovation debts are paid‌ off.


    So, Are Renovations Worth It?

    Your long-term goals determine whether renovations make sense. If increasing home value for resale, target updates providing the best return on investment. If you prioritize improving everyday enjoyment, projects with a lower return on investment can be worthwhile.

    Keeping costs within your budget is the key. Over-leveraging reduces value. Do research, get multiple quotes, contribute your own labor where possible, and explore all financing options to control expenses. With careful planning, you can complete renovations tailored to your situation and enjoy the upgrades for years‌ to come.


    FAQs About Funding Home Renovations

    What is the cheapest way to pay for a home renovation?

    The cheapest way is to save up and pay cash from your own funds. But for most, the next best option is a 0% introductory-rate credit card. Pay off the balance during the 0% period to avoid interest charges.


    Should I take a personal loan or home equity line of credit for my remodel?

    A Home Equity Line of Credit (HELOC) usually has lower interest rates but puts your home at risk. Only take a HELOC if confident you can repay.


    What credit score do I need for renovation financing?

    Requirements vary, but you generally need a minimum of 670 for the best loan and card rates. The higher your score, the lower the interest rate you’ll qualify for.


    How can I get approved for financing if I have bad credit?

    Options are limited, but you may qualify for an FHA renovation loan or credit card for those with poor credit. Save what you can in cash to reduce the amount needed to finance.


    Editorial Contributors
    avatar for Laurie Engle

    Laurie Engle

    Expert Writer & Reviewer

    Laurie Engle is a freelance writer who provides insights to homeowners on topics such as the home warranty industry, relocation issues, and real estate trends. As a licensed Realtor since 2001 Laurie has acquired extensive expertise in dealing with home warranty companies and navigating the intricacies of the real estate market. In addition to her commitment to helping clients with their home buying and selling needs, she maintains a sharp awareness of market dynamics, including property values, interest rates, and local regulations.

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    photo of Casey Daniel

    Casey Daniel

    Casey Daniel is a writer and editor with a passion for empowering readers to improve their homes and their lives. She has written and reviewed content across multiple topics, including home improvement, lawn and garden care, sustainability, and health and wellness. When she’s not reviewing articles, Casey is usually playing board games, repainting her bathroom, or quilting.

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