Small Loans, Big Changes: Renovating Your Home on a Budget

Did you know homeowners spend $15,000 on average per renovation project? Costs vary widely depending on where you live, your home's size, and the quality of materials. Still, one thing's for sure: remodeling is an expensive undertaking. That's why you'll want to set a realistic budget and explore different financing options before applying that first coat of paint.

Let's look at traditional and alternative financing options often used for home renovations to help you choose one that best fits your financial circumstances and long-term goals.

Traditional financing options for home renovations

Traditional financing is any type of credit provided by major banks and other conventional financing institutions. Traditional options typically offer longer repayment terms and lower interest rates, but they have strict application and credit score requirements. Applications can also take a long time to approve, which could mean waiting days or weeks for funding.

Qualified borrowers with a strong credit history, a good credit score, and a low debt-to-income ratio might consider one of the following financing options:

Low-interest-rate credit cards

Utilizing credit cards with low interest rates can be an effective way to finance certain home renovation projects. Just be sure to keep your spending in check, as carrying high credit card balances can negatively impact your credit score.


One of the biggest advantages of using a credit card is the convenience. Credit cards are accepted almost anywhere, including home improvement stores. They also provide an instantaneous payment method that doesn't require extra paperwork or waiting on funds.


You'll need excellent credit to qualify for the most competitive rates. Plus, if you do have bad credit, you might not be eligible for a credit card with a high enough credit limit to cover your remodel.

Additionally, many contractors will pass on any surcharge or other fees they incur in order to take payment via card instead of cash. For a $10,000 project, even just a 3% surcharge adds $300 to your total costs before you even consider the credit card interest.

Home equity loans

A home equity loan is a type of loan that allows you to borrow money against your property's value. The loan is secured by the equity in your home, which is the difference between its current market value and your remaining mortgage balance.


Home equity loans typically have fixed interest rates and are often used for major expenses like home improvement projects. They can also be easy to qualify for if you have equity built up in your home.


They can take a longer time to get approval and there are often closing costs, especially if an appraisal is required. You also may have difficulty selling your home until you repay the home equity loan in full — and you also risk losing your home if you fail to make your monthly payments.

Cash-out refinancing

Whereas a home equity loan is a second loan in addition to your mortgage, a cash-out refinance pays off your existing mortgage and gives you extra cash to pay for things like a home renovation.


A cash-out refinance offers predictable monthly payments and lower interest rates compared to most credit cards and small personal loans. You may also qualify for tax deductions if you use the extra cash to make improvements that add value to your home.


As with a home equity loan, you’ll incur the delay and expense of valuing the property as well as some closing costs — and you risk losing your home if you fail to repay the loan. In the case of a cash-out refinance, though, all your debt will be consolidated into your first mortgage instead of having two separate loans.

Additionally, unlike home equity loans (which will often allow you to take money only on an as needed basis), a cash-out refinance requires that you know in advance how much money you need, and you’ll pay interest on the full amount regardless of whether/when you use it.

Alternative financing options for home renovations

Homeowners with less-than-perfect credit may find it difficult to secure funding for home renovations through traditional channels. Alternative financing can be a great solution.

Here are some of the most common bad-credit loans and financing options:

Installment loans

An installment loan is a type of personal loan that you repay over time in fixed monthly payments. Since the payments are spread out over a predetermined period, it can be easy to budget for your home renovations.


Many lenders consider your employment history and proof of income in addition to your credit score, making it easier to qualify for an installment loan. And since you don't have to use your property as collateral, you're not risking your home to get the money you need to renovate.


Installment loans can offer lower interest rates compared to other types of alternative financing, but the interest is still higher than what you’ll find with traditional loans. Loan rates and terms vary widely between lenders, so be sure to shop around to find the most competitive rates.

Lines of credit

Opening a line of credit is a convenient option when you're remodeling your home on a budget. Unlike other small personal loans, a line of credit allows you to draw money as needed up to a set limit.


With a line of credit, you only pay interest on the amount of money you draw, not the full amount you're approved for. Whether you withdraw the minimum borrowing amount over multiple projects or a larger lump sum all at once, you're in control.


Lines of credit can be less predictable for both the lender and the borrower. Because of this, you may pay a higher interest rate on a line of credit than you would on an installment loan or a payday loan, or you may find it difficult to control your spending if you are not forced to budget and plan for it in advance.

Payday loans

A payday loan can be helpful when you need quick loan funds to replace a broken washing machine, hire a plumber, or cover some other unexpected expense. These small personal loans won't cover big renovation projects, but they're a viable option when you're in a bind and can't wait until payday.


Payday lenders often offer fast approvals and often can give same-day funding. Even if you have bad credit, lenders rely more on your monthly income and employment status than a credit check.


Payday loan amounts are limited because you'll have to repay the loan in full on your next payday. Because of this, you need to be confident you can pay off the loan on time. It's also critical that you choose a reputable lender that is transparent about their loan rates, terms, and fees so you can make an informed decision.

Apply for a small personal loan from Advance America

If you need a small personal loan to pay for your renovation project, but you don't have a solid credit history to qualify for traditional financing, Advance America can help.

Our online application process is easy. You only need a few items on hand to apply, including:

  • Government-issued ID
  • Checking account
  • Proof of income
  • Proof of address

Prefer to discuss your options face-to-face? Visit your nearest Advance America branch.

Once your application is approved, you'll be able to access funds quickly. In fact, those approved in-store can walk out with their loan funds. Online applications approved before 10:30 AM EST are funded via direct deposit by the end of the day. Those approved after 10:30 AM EST are funded the following business day (excluding weekends and holidays).

The cost of renovations shouldn't hold you back from making necessary home improvements. Apply now to see for yourself why Advance America has been a trusted lender for more than 25 years.

The Advance America advantage

Since 1997, Advance America has helped millions of hardworking people with a variety of financial solutions including Payday Loans, Online Loans, Installment Loans, Title Loans and Personal Lines of Credit.
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