How to Finance a Home Remodel When You Have Credit Issues

How to Finance a Home Remodel When You Have Credit Issues

Bad credit causes all sorts of problems. Applying for a credit card, car loan, and even financing furniture becomes a hassle. Fortunately, those with bad credit have options. But you just have to look for them.

Owning a home is a perfect example. There are mortgage loan options for people with bad credit. But eventually, you'll want to remodel your home.

This task is difficult if you have bad credit. You'll have to finance many appliances and furniture. And buying new decor can get expensive without a reliable line of credit.

But there are ways to remodel your home with bad credit.

Here's how to finance a home remodel, even if you have bad credit.

Improve Your Credit Score

This may seem like a long shot, but improving your credit score will make the remodeling process easier. Instead of immediately jumping on your remodeling project, take some time to focus on your credit score.

Pay off credit card bills, pay off your car, or even get as far with your mortgage payments as you can.

Using old appliances or looking at outdated furniture for an extra year or two may be irritating. But when you have an improved credit score, it will all be worth it.

Barter with a Professional

a handshake

If there's no way you can improve your credit score, you have two options: take out a loan or make a deal with a remodeling professional.

When you take out a loan, you risk your credit score plummeting further.

But bartering with a professional also seems out of the question. You shouldn't give up hope -- there are plenty of pros who are willing to exchange or negotiate on additional payment terms.

The best example of this is a service-for-service exchange. Maybe you have a career, skill, or trade the professional needs.

For example, if the remodeling pro needs an accountant and you're a professional accountant, offer your skills in exchange for their service.

Your services don't even need to be something the professional needs, but you can offer in exchange for payment. Let's say you own a jewelry store.

Maybe the remodeling professional doesn't need jewelry, but you notice their fees are the same price as a brand new watch you just received. Offer them the watch in exchange for their services.

You'll be surprised how flexible some professionals are. And if they're not? The worst they can say is no.

Loan Options

If you can't barter other payment options with your remodeling team, then you have no choice but to take out a loan. But taking out a loan isn't as scary as you think, even with bad credit.

Some loans offer low-interest rates and flexible options for people with bad credit.

Refinance Your Home

Is your home paid off? Or do you owe less than what the house is worth? You can refinance your home and take the equity out of your home. That's cash you can use for your remodeling project.

This method has its pros and cons. But you can end up spending less (or none) of your personal budget and use the equity to pay off your remodel.

But it's important that your home if either paid off or close to paid off. Refinancing your home early could result in more payments.

Home Improvement Loans

Home improvement loans are also great options for those with bad credit scores.

There are two options: using your home equity or taking a home improvement loan as a personal loan. The type you choose depends on your project, your mortgage, and your credit score.

A home equity loan is similar to refinancing your home. But rather than taking the equity out as cash, the equity works similar to a loan. You have access to that equity but you pay it off with monthly payments.

This option is risky. If you can't afford your loan and equity payments, your lender can force your home into foreclosure.

Even if you have bad credit, a personal loan is a safer option.

These personal loans tie into your individual creditworthiness and financial situation, not your home. You could risk high-interest rates, but this is a safer option if you still have lots of mortgage payments left.

You can borrow anywhere between $1,000 and $50,000. Since a typical remodeling project costs $10,000, you can easily borrow the amount you need.

You'll also have a fixed interest rate and a timetable to pay off the loan, which is typically between two and five years.

Department of Housing and Urban Development

If you only need extra funds for your remodeling project and don't want to risk your mortgage or credit score, ask the Department of Housing and Urban Development, or HUD. They offer renovation-specific loans.

There are restrictions. Approval must be through HUD-specialty lenders. You can only use this loan for your renovation.

Installment Loans

If all else fails, installment loans are an option. Installment loans work for borrowers of all credit score types. These loans are either secured (require collateral) or unsecured.

Installment loans are flexible, with fixed-interest rates and generous borrowing amounts.

Another reason why bad credit homeowners choose installment loans is the monthly payment options. Bad credit loans monthly payments last up to 18 months.

You can easily budget your monthly expenses and pay off your remodeling project in less than two years. Since installment loans have fixed interest rates, you're never paying more on a monthly basis.

Now You Know How to Finance a Home Remodel With Bad Credit

If you have bad credit, your financial options are limited. Fortunately, you can still finance your home remodel. You just need to know how to finance a home remodel with bad credit.

If you paid off your home, you can take the equity out as cash or pay off the equity you use for your remodel. You can seek home improvement loans and personal loans for your renovation.

But the best options is to improve your credit score before you start your remodeling project.

For more home remodeling tips, visit this blog.

Related Posts

Leave a Comment: