Are you one of the many homeowners in the U.S. looking to start a renovation project? According to Houzz Pro, more than half of homeowners (55%) plan to renovate in 2022. With interest rates rising rapidly, homeowners are less apt to search for a new home and more inclined to fix up their current one. Your home is your biggest asset, and renovating it now can prove to be a smart investment down the road.

As a homeowner, you have a variety of payment options to fund your renovation, so how do you choose which one is best? Below we weigh the pros and cons of popular payment options, including HELOCs, personal loans, credit cards, and home improvement financing, to help you make an informed decision.

HELOC

A home equity line of credit (HELOC) allows you to borrow money using the equity or value of your home as collateral. This process varies greatly depending on the lending institution that you work with. Each bank or credit union has its own unique process, stipulations, and timeline.

Pros

• Low-interest rates are typically available
• Large credit limits
• Flexibility in the amount of how much or how little of your total credit is used
• Interest is tax deductible if you use the funds for renovations on your home

Cons

• Lengthy and cumbersome application process
• Closing costs are usually 2-5% of the loan amount
• Your home serves as collateral on the HELOC, which puts you at risk of losing it.
• Most HELOCs have variable interest rates. These rates are tied to an index; when the rate rises, yours will, too.
• Equity reduction
• Penalties and fees
• Sometimes a HELOC is structured with a balloon payment which is a larger-than-usual one-time payment.
• If you decide to sell your home, most HELOCs make you pay off your credit line at the same time.

Personal Loan

A personal loan is a type of installment loan from a bank or institution with a set repayment period and consistent monthly payments. Most personal loans are unsecured loans, which means they don’t require collateral. Interest rates will vary based on the length of the loan, your credit score, the loan amount, and the lender.

Pros

• Flexible borrowing limits
• No collateral needed
• Pay for purchases over time

Cons

• High-interest rates
• Lack of promotional offers
• Fees and penalties

Credit Card

A credit card lets you borrow from a line of credit from a bank to pay for expenses. You have to repay what you borrow by a due date or incur interest charges.

Pros

• Rewards
• Cashback
• Strong fraud protection

Cons

• High-interest rates
• Low credit limits
• Fees

Momnt Home Improvement Financing

Momnt Home Improvement Financing is an unsecured installment loan offered directly through a Momnt-approved contractor.

Pros

• Instant decision on your application
• A simple and secure digital application is sent right to your device, which allows for complete privacy and data control.
• Soft credit pulls when viewing your pre-qualified offers
• 100% digital process — no paperwork to deal with
• No collateral or stipulations required
• High borrowing limits of up to $55,000 based on qualifications
• No early payment penalty
• Promotional finance offers available for qualified buyers
• 5-month purchase window to transact on your loan

Cons

• Only merchants that are Momnt certified can offer Momnt financing.
• You may not qualify for all promotional financing offers

If you’re interested in financing your home remodeling project with Momnt, ask your contractor if they offer Momnt Home Improvement Financing. The home improvement process is infamously associated with difficulties, unexpected surprises, and financial headaches. Our product helps minimize potential pitfalls and allows you to experience less stress and more joy while you get to bring your vision to life.

Happy renovating!