How Do You Pay For A New Home Renovation?

Want to renovate your home? Congratulations. That’s a great idea. But you might be wondering how you’re going to pay for it. We’re here to help! There are many options out there, so let’s take a look at them in detail.

How to get a renovation loan when buying a home
Financing options for home renovation include home equity loans and lines of credit, personal loans, credit cards, and government loans.
When choosing a financing option for your home renovation, consider the interest rate, fees, repayment terms, and financing amount.
It is possible to get a home renovation loan with bad credit, but you may face higher interest rates.
Credit cards can be an option to finance home renovation, but they come with high-interest rates and potential fees.
You can use a home renovation loan to finance a DIY project, but make sure to check with your lender if your project is eligible for financing.

Save Up Money

Save up money. This seems pretty obvious, but it’s important to start saving for your home renovation early. The earlier you begin saving, the more options you’ll have when it comes time to pull out your wallet. 

You’ll also be able to save more if you wait until later on in life because many people are not going to be able or willing to spend their retirement savings on an expensive house renovation project like this one.

If possible, try cutting back on expenses so that there’s more money available for your new home renovation project. If that’s not possible—or if it simply doesn’t work well with your lifestyle—find ways of earning extra cash instead! Maybe get another job or do some freelance work on the side? 

Just don’t forget all those expenses (like taxes) when figuring out how much money is left over after paying bills each month!

Building a realistic budget is crucial when planning a home renovation. Our article on how home renovations work provides valuable insights into the renovation planning process, including budgeting and financing options.

Unsecured Loans

Unsecured loans are the most common way to pay for a home renovation. This type of loan is available from banks and credit unions, and can be obtained at low interest rates. 

Unsecured loans are not secured by any collateral, which means that if you default on your payments, the lender has no legal recourse to recover their money. 

Instead, they will usually contact you about making a payment or negotiating a repayment plan before filing for bankruptcy and selling off all your assets (including your house).

Unsecured Loans Table

No collateral is requiredHigher interest rates than a secured loan
Easy and fast approval processLower borrowing limits
Fixed interest ratesLonger repayment terms
Available for various expenses
Can improve credit score with on-time payments

The above table presents the pros and cons of unsecured loans for financing home renovations. Unsecured loans are a common and convenient way to finance renovations since they do not require putting up any collateral.

Home Equity Loans

You can also take out a home equity loan or line of credit. If you use this method, you would be borrowing against the value of your home and will not have to pay back any interest as long as it remains your primary residence. You can borrow up to 80% of the appraised value of your home (less than 90%, in most cases).

The interest rate on these loans is typically lower than other loans and they may have lower fees than some first-time buyers are used to paying, but they aren’t always available with all loan types. 

This makes them better suited for people who already have high credit scores and stable income streams that they don’t need immediate access to—if those things don’t apply to you yet, then refinancing might still be worth looking into!

Understanding how to run plumbing correctly is essential when renovating a home. Visit our article on running plumbing expert advice to learn expert tips on running pipes effectively that can save you valuable money on potential repairs.

Secured Loans

Secured loans are loans that you can get with your home as collateral. If you have good credit and a decent income, it’s worth considering this option. Secured loans typically come with lower rates than unsecured personal loans.

They’re a good option if you’re planning to use the money on home improvements, debt consolidation or a new car all of which require significant amounts of cash upfront but involve less risk than other investments (such as stocks). 

They also make sense if you don’t have any assets that could serve as collateral for an unsecured loan.

If possible, try to pay off any existing debt before securing another loan so that your credit score won’t take too much of a hit in case something goes wrong down the road and you default on payments.

Credit Cards

If you have a credit card, you can use it to pay for the materials and services needed to renovate your home. You’ll need to pay off the balance before interest kicks in, but if you don’t have cash on hand or access to a line of credit this is a great option for financing your renovation.

You can use credit cards at some home improvement stores as well as other local retailers that sell materials such as paint and tile. 

If you choose this route, make sure that the store has an established business relationship with your bank or credit union so that they can process payments quickly and efficiently.

If you want to finance your renovation project through a credit card, exploring different options is key. Luckily, our article on how major credit cards compare offers a comprehensive comparison of various credit cards to help you pick the perfect financing option suitable for you.

Personal Loan

If you have good credit and a steady income, a personal loan is a great way to pay for your home renovation. A personal loan is an unsecured loan that serves as the perfect alternative to a home equity line of credit (HELOC), since it offers lower interest rates and better terms.

Personal loans are also relatively short term, which means they come with lower monthly payments than HELOCs. This makes them more affordable in the long run as well—a benefit if you’re on a tight budget!

Because they’re shorter term, personal loans don’t require much paperwork or collateral like mortgages do; this allows borrowers to get approved quickly without putting up collateral or waiting weeks or months for approval.

Personal Loan Table

Available as unsecured loansRequires good credit and stable income
Low interest ratesBorrowing limit might not cover all renovation costs
Fixed interest rates and paymentsMight come with prepayment penalties
Shorter repayment terms than home equity loans or lines of creditCan affect debt-to-income ratio
No collateral required

The above table presents the pros and cons of personal loans as a financing option for home renovations. Personal loans are an excellent option for those with good credit and stable income, as they offer lower interest rates and better terms than HELOCs. However, borrowing limits may not cover all renovation costs, and they might come with prepayment penalties.

Credit Union Loan

Credit union loans are another option for home improvement financing. Credit unions are not-for-profit, member-owned financial cooperatives that offer a wide range of financial products and services, including mortgages.

Credit unions are very different from banks: they’re federally regulated but not by the same laws as banks; they tend to have lower interest rates and fewer fees than bank loans; and you must be part of the organization in order to take out a loan from it you can’t just walk into one and apply for a credit union loan on your own (although some will allow nonmembers to apply). 

If you’re interested in applying for a credit union mortgage instead of using your bank’s mortgage program, check with your local credit union first to see if it offers mortgages at all.

Finding financing for your home renovation project through a loan can be the best route for some homeowners. Our article on getting a home renovation loan explained explains the loan process and the types of loans available, making it easier for homeowners to access loans that meet their financial needs.

Government Grants And Programs

Grants are a form of financial aid that is not repaid. They’re available for low-income individuals and families, people with disabilities, students, homeowners the list goes on! If you qualify for a grant, it should be significantly less than the total cost of your renovation project.

The government offers several grants and tax credits specifically designed to help people make energy efficient improvements in their homes. You can find out more about these programs on the Energy Star website or by visiting your local library.

Cash-Out Refinance Mortgage Loan

Cash-out refinance mortgage loan is a method of financing a home renovation. It’s similar to a regular mortgage: you’re borrowing money against your house.

However, with the cash-out refinance, you borrow more than you did on your original loan. You can use this extra cash to pay for renovations and repairs to your home or invest in other assets.

Before deciding whether or not to use this method of paying for renovations, make sure that it makes sense financially for you and your family by comparing various options as well as looking at previous tax returns so that there are no surprises come tax time (or worse—a nasty surprise from the IRS).

Home Equity Line Of Credit (Heloc) – Best For Home Improvements For Bad Credit

An equity line of credit, also known as a home equity loan or HELOC, is one of the best ways to pay for home improvements. It’s a revolving line of credit that you can use to borrow money whenever you need it—up to a set limit.

A HELOC is similar to a traditional mortgage in that it allows you to borrow against the equity in your home. What makes them unique is that while they’re secured by real estate (like traditional mortgages), they can be used for things other than purchasing property.

A homeowner could use one for any number of reasons: paying off debt, making repairs or renovations and even starting a business! 

The only thing holding most people back from taking out this type of loan is their credit score and ability to repay their debt responsibly on time each month.

Borrow From A Retirement Account – Best For Homeowners 65 Or Older

You can borrow from a retirement account, if you’re 65 or older.

A 401(k) loan is typically made in conjunction with an IRA or Roth IRA loan. The borrower must be sure to repay the loan in full by retirement age, so this type of borrowing is only for people who are confident about their ability to pay back the money before retirement age (which is usually 65).

You may be able to take out a loan against your 403(b), but it depends on your employer’s plan and rules regarding loans. 

If allowed, these have less stringent requirements than 401(k)s but more stringent requirements than IRAs or Roth IRAs because they’re administered through nonprofits rather than private companies like banks or credit unions like other types of loans mentioned here.”


If you’re looking to make home renovations, there are many options for financing. You can save up money for a down payment or use your credit cards. 

If you don’t have enough saved up, consider unsecured loans or HELOCs for bad credit homeowners who want to borrow more than $100,000. For example: if you have an older home with low equity and bad credit history (i.e., no mortgage or car payments).

Further reading

If you are considering home improvements, check out Bankrate’s guide on how to pay for home improvements for an in-depth look into the various financing options available to homeowners.

CNBC’s guide on how to pay for home renovations provides valuable tips for homeowners looking to fund their next renovation project. The guide offers creative financing solutions and advice, making it a great starting point for homeowners.

US News Money’s article on how to pay for your home renovations offers helpful insights and strategies for financing your home renovation. The article explains the pros and cons of different financing options available to homeowners, making it a handy reference guide.


What are some financing options for home renovation?

There are several financing options for home renovation such as home equity loans and lines of credit, personal loans, credit cards, and government loans. You can also consider borrowing money from family and friends or ask for a salary advance from your employer.

Is it possible to get a home renovation loan with bad credit?

Yes, it is possible to get a home renovation loan with bad credit, but you may face higher interest rates. You can look into government loans like FHA 203(k) loans or consider a personal loan from a lending institution.

What factors should I consider when choosing a financing option for my home renovation?

You should consider the interest rate, fees, repayment terms, and the financing amount when choosing a financing option for your home renovation. It is essential to know how much you need for your renovation, as well as your credit score and income.

What are the pros and cons of using credit cards to finance a home renovation?

Credit cards can be an option to finance home renovation, depending on your credit score and credit history. The pros of using a credit card are the convenience, the possibility of earning rewards, and the capacity to fund smaller projects. However, the cons are the high-interest rates, potential fees, and the possibility of a high credit utilization ratio.

Can I use a home renovation loan to finance my DIY project?

Yes, you can use a home renovation loan like a personal loan or a home equity loan/line of credit to finance a DIY project. Some loans have specific criteria for what counts as an eligible renovation expense. Check with your lender to ensure that your DIY project is eligible for financing.