Taking on home improvement projects is exciting! Whether you’d like to replace a few windows or an entire kitchen, these projects will help your home become the one you’ve always wanted. Coming up with home improvement ideas is the easy part; you’ll also have to decide how to pay for these improvements. With so many payment options available, how can you choose? Here are some tips to help you decide which is best for you.

Small Home Improvement Projects

Perhaps you have decided on a home improvement project that can be completed in a day or two and isn’t all that costly. Still, it may call for more cash than you have on hand, or are comfortable spending all at once:

• Major Credit Cards: If no store promotions are available, your major credit card offers a way to finance small projects without having to wait for approval. You should be able to pay for your project within a few months to a year to avoid paying a high amount of interest.
• Store Credit Cards: If you are purchasing your materials and services from a warehouse store, check to see if the store is running an interest-free promotion. You may be able to use your store credit card and get as much as a year to pay off your home improvement without interest.

Ongoing Improvements with a HELOC

What if you have multiple projects that will take many years to complete? If you have enough equity in your home, a home equity line of credit (HELOC) may be an excellent option for you. A HELOC is a credit line, which you can use to borrow only what you need, as you need it. Here are some HELOC basics:

• Average closing costs for a HELOC are about $60, and expect a maintenance fee of about $50 annually.
• Interest payments up to $100,000 are tax deductable.
• Interest rates are floating and will fluctuate based on the prime rate plus or minus a percentage.
• You can usually spend from your HELOC account for up to 10 years.

One-Time Improvements with Home Equity Loans

If you have equity in your home, and are considering a one-time big project, a home equity loan might be right for you. These home improvement loans offer a fixed interest rate and a payment that stays the same for the duration of the loan.

Title 1 Loans

Federally insured Title 1 loans are offered by many banks and lenders, and offer a solution for those who need to make improvements to their homes, but have not yet built up substantial equity. Remember that you can only use a Title 1 loan for necessary home improvements. Luxury items such as swimming pools or spas won’t qualify.

Other Creative Ways to Finance

You may already have the means to pay for your home improvements without even realizing it. Here are a few creative financing ideas to consider:

• Borrowing from the cash value of your life insurance policy
• Borrowing from your 401 (k)
• Taking a margin loan against your securities.