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4 Home Repair Financing Options

May 21, 2021 by Daniel Azzoli

tools on a table.

A broken window, a leaky water pipe, a malfunctioning furnace — these are just a few examples of things that may need to be repaired around the house and that can blow up your bank account. If you find yourself facing a pricey repair bill without the savings to handle it, you may need to start looking at the different borrowing options that may be able to help you out. But before you skip ahead to the application step, you should take the time to do some research and educate yourself on some of the different home repair financing options out there. This way, you’ll be armed with the knowledge you need to make a decision that suits your financial situation.

So, while you might be able to take care of small repair expenses out of pocket, if you need a little more info on financing options for expensive scenarios, we’ve got you covered! We’ll go over instances where it might be worth it to apply for a loan for home repair, and then cover some potential financing options.

When Should I Consider Home Repair Financing Options?

Like we said, there are some important steps to go through before you decide to apply for any sort of home repair financing option. One of the biggest things to figure out is whether or not you should be looking to borrow money in the first place.

Person measuring and cutting flooring.

There are all sorts of variables that go into making this decision, like your income, how much money you have saved, how much debt you currently have, how urgent the home repair is, and more. If you’re looking to do some elective renovations that aren’t tied to an immediate need, you should aim to save up for this in advance. There’s no need to take on debt just to install some slightly prettier bathroom tiles. But if you run into some sort of emergency situation that requires your immediate attention and you don’t have enough money saved up to take care of it out of pocket, you might be in need of a home repair financing option.

If it isn’t immediately obvious whether you should apply for a loan or not, take a look at your budget. Do you think you have enough room to fit in loan payments? If you can, what’s the most you could afford? How long could you continue to find room in your budget?

Give these questions some thought, and make sure you have a clear view of things before you make any decisions. If you’ve gone over your finances thoroughly, researched or assessed the cost of the options that may be available to you, and you feel like you can afford to take on debt, then you may give yourself the green light to submit a loan application.

4 Financing Options for Home Repairs

If you find yourself facing an emergency home repair and you feel like you’re in the right financial position to take on a home repair financing option, you might be ready submit an application for a loan. The issue is, how do you know which route to pursue? With all of the possible options out there, you’ll need to take a look at the field and try to find something that suits your situation.

Where do you start? With research. We’ve listed some of the more common options that may be available to you to help you get started.

1. Home Equity Line of Credit

Maybe a small repair that you’ve been putting off has festered into something more substantial, or maybe you just got unlucky, but there are times when an emergency home repair is more than just a quick fix. In those instances, a larger scale renovation may be the only solution to your ailing home. With bigger jobs, the exact cost and length of the project may not always be clear. In those instances, a home equity line of credit (HELOC), may be a useful home repair financing option to have at your disposal.

One of the main defining features of a HELOC is that it falls under the umbrella of secured loans. This means that to qualify for this type of loan, you’ll need to put forth an asset to serve as collateral. If you start to miss payments on your loan, the financial institution can still get some form of payment out of the interaction. They’ll do this by seizing the collateral you’ve pledged.

When it comes to a home equity line of credit, the collateral that you’re putting up is the equity you have in your home. But why opt for a secured loan and risk losing a valuable asset? Well, when the financial institution providing the loan has a financial safety net in place with these types of loans, their rates generally won’t be as high as they would be for many unsecured loans.

Tools sitting on a work table

Another thing that stands out about a HELOC is that, just like credit cards and other types of lines of credit, it’s a form of revolving credit. This means that if approved, you’ll have a specific credit limit to borrow from.

Generally speaking, you can draw available funds whenever you need during your draw period, and you’ll only be charged any applicable interest and/or fees on the amount you’ve drawn, not the total limit of your line of credit. Just make sure that you’re keeping track of the phase of your HELOC that you’re in, and know when you enter the repayment phase so you can pay off what you’ve borrowed. This is what determines whether or not you’re able to draw funds in the first place, and what your payments are going to look like.

When Should I Consider a Home Equity Line of Credit?

A HELOC can be a good home repair financing option when you don’t have a clear idea of how long your project is going to take, and you aren’t sure what the final cost is going to be. Because it’s a form of revolving credit that allows you to determine how much you need to draw (as long as you have available credit), it may be a fairly flexible borrowing option for some. But make sure you always remember what’s on the line if you don’t pay back what you’ve borrowed. With a HELOC, since the collateral you’ve put up is your home, missing payments can eventually lead you to have to foreclose your home.

2. Home Equity Loan

You may have guessed it from its name, but a home equity loan is another home repair financing option for larger home improvement projects, and it has some similarities to a home equity line of credit.

The main overlap is that it’s also a secured loan that requires you to put up collateral in the form of equity in your home. But instead of getting access to a line of credit, it functions as a personal installment loan. This means that you’ll be given a lump sum of cash that you’ll then need to pay back in fixed installments over the course of a pre-determined schedule. The amount of time it takes to pay back one of these loans can change based on a bunch of different variables, but since this loan will likely fall on the bigger end of the spectrum, it may take years to pay back in full.

Paint swatches.

This option for home repair financing can be useful when you know exactly how much the repair/project is going to cost you. Because your payments are fixed and scheduled ahead of time, you’ll be able to see exactly how much they are and plan how you’re going to fit these payments into your budget. Just remember that the stakes are high for defaulting on this loan, as your home could eventually go into foreclosure if you can’t make your payments.

3. Personal Loans

If you feel like putting your home on the line is too risky, or you just don’t need the amount of money that one of the previous entries on this list would offer you, a personal loan may be a good option for you.

If you look for an unsecured personal loan, you won’t need to put up any sort of collateral to qualify. Just keep in mind that because a financial institution would have no assurances that they’ll get something out of the interaction if you can’t make your payments, you may need a good credit score to get approved for favorable rates and prove that you’re a reliable borrower, depending on the type of loan.

There are plenty of different types of personal loans that may be able to help you deal with an emergency home repair. This could include things like:

They all have different benefits, so you’ll need to do some research to find an option that’s suited to your situation. You can usually apply for these loans online or from storefront lenders. If you need a loan for a relatively small repair, personal loans can be a good option.

4. Credit Cards

You might already be pretty familiar with credit cards, but they’re a form of revolving credit that can enable you to buy things when you don’t have the money up front. You can even earn rewards on the purchases you make on your credit card. Just keep in mind that you shouldn’t use a credit card for things that you aren’t going to be able to pay off by the due date. Late payments on your credit cards often come with fairly high interest rates, and you could also potentially harm your credit score.

Credit card for home repair financing.

Prepare for Future Repairs with an Emergency Fund

Really, the best home repair financing option out there is your emergency fund. This should be your first line of defense any time you come up against an emergency expense. Do your best to find some room in your budget to make small contributions to your emergency fund as much as possible. Even if you can only contribute small amounts at a time, the money you save up can be the difference between having to take on debt to handle an emergency, and being able to pay for your expense out of pocket.

Overall, make sure you research all of your options and approach this process carefully. Taking on debt without making sure you’re able to pay it off comfortably is a dangerous game, but if you do your research, you can find a home repair financing option that works for you!


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