How to Finance Your Home Improvement Projects
Your home is more than just a house. It’s where you create memories with friends and family. It’s a reflection of you and your personality. It’s a financial investment. And it’s a place where you spend a lot of time!
Customizing your living space to fit your needs and building an environment where you feel comfortable is a common goal among homeowners. However, deciding the right way to finance these projects can be quite confusing.
From upgrading furniture to remodeling a kitchen or installing a pool, a variety of financing options are available. To find the solution that works best for your project, review the following options that CAMPUS has to offer below.
Home Equity Loans
One of the greatest perks of owning a house is the ability to tap into your home’s equity. You can borrow against your home’s equity to fund extensive or ongoing home improvement projects.
A home’s equity is calculated by: Home Value – Amount Owed = Home Equity
For example, if your home appraises for $200,000 and you owe $150,000 on your mortgage, your home’s equity could be $50,000. You can then use a portion of this equity through a home equity loan.
Since home equity loans use your house as collateral, the interest rates are typically much lower than personal loans or credit cards. Plus, the loan terms typically range up to 10 years, making the monthly payments more affordable.
There are actually two types of home equity loans – each with its own perks:
- Home Equity Loan: A traditional home equity loan provides you with the funds you need for your home improvement upfront in one lump sum. These loans are great options if you know the total amount of your project in advance. For example, if the new pool you plan to build costs $40,000, you would receive the full amount at the time of signing your loan paperwork.
- Home Equity Line of Credit: Unlike a home equity loan, where the funds are disbursed upfront, a Home Equity Line of Credit (HELOC) allows you to choose when to spend the loan amount. For example, if you’re approved for a $40,000 HELOC, you can spend $2,000 now and still have $38,000 to use later. And you only repay what you borrow – not the total approved amount.
Once you repay the borrowed amount, you can then draw on the funds again throughout the life of your loan. A HELOC is an excellent option if you have ongoing projects, such as remodeling several rooms in your home, as it gives you more flexibility than a traditional home equity loan.
How to Use a Home Equity Loan Responsibly:
Again, home equity loans offer a range of financial benefits to homeowners. The ability to borrow low-cost funds with extended payment terms is financially significant. However, you also want to avoid risking your property due to improper spending.
Before you apply for a home equity loan or borrow from your existing HELOC, ask yourself a series of questions:
- Why am I borrowing this money? Will it improve your financial situation? Will it add value to your home?
- Can I comfortably repay this loan? Do you have a secure job and a consistent monthly income? Is the monthly payment affordable?
Taking a moment to review your options is a crucial step to ensure responsible borrowing and spending.
Personal Loans
Similar to a credit card, personal loans are unsecured loans and typically have higher interest rates. However, personal loans offer two significant benefits:
- You’re approved for a set amount that makes staying within budget easier.
- Since personal loans have set monthly payments, you’ll often pay off the balance quicker and pay less interest versus only making minimum payments on a credit card.
Personal loans are an excellent option for mid-sized projects around $10,000 or less. These could include upgrading furniture, installing new carpet, painting your home, or customizing a home office.
To make your home improvement plans even easier, CAMPUS offers a Simplicity Home Improvement Loan — part of the CAMPUS Simplicity Loan lineup that features a quick and simple application with fast approvals and, in most cases, funds deposited directly into your checking account the same day. This loan gives you the freedom to upgrade your kitchen, install that pool you’ve always wanted, or handle unexpected repairs without tapping into your home’s equity, so you can act sooner and with less stress.
We’re Here to Help!
When choosing a loan for home improvement, there isn’t necessarily a “right” or “wrong” choice. In the end, you want to choose a loan that provides you with the necessary funds for your remodeling while incurring as little interest as possible.
For guidance on which financing option will work best for your project, we’re here to help. Please stop by any of our convenient Service Center locations, make an appointment, or call us at 800-367-6440 and press 7 today!
By CAMPUS USA