Litoc.com -- Home and Family

Is it time for new carpet?  Do you need to upgrade your wiring?  Maybe you just want to treat yourself to a slick new kitchen.  Finding ways to improve your home is easy.  Finding the cash to pay for it can be a little tougher.  Fortunately, help may be close at hand though various means of securing home improvement financing.

So, what's your big plan?  After all, the first step to determining home improvement financing is to figure out what you want to accomplish in your house, so you need a big plan.  Are you remodeling just one room, or are you dreaming of installing an Olympic sized pool in the backyard?  What kind of budget do you have in mind to make it all work?  Once you have answers to these questions, and a solid plan in place, it's time to start looking at what options are available to you.

Credit Cards
Smaller jobs that only cost a few hundred dollars are usually taken care of with credit.  Even financial experts will suggest that credit, whether through a bank credit card or store credit, is the best way to financing smaller loans.  You can pay it off quickly, and you may be able to earn travel or store bonus points with your purchase.

Home Equity Loans
Larger jobs require bigger sums of money, and that’s when home equity loans come into play.  This type of home improvement financing allows you to borrow money using the value of your property as collateral.  Another bonus is that, providing the terms fall within certain limits, you can write the interest off as a taxable expense.  Unfortunately, if you are doing the work on your own instead of using a licensed contractor, you may have a harder time securing a home equity loan.

401K
Another relatively painless option is to take money out of your company's 401K plans.  If this option is open to you, it can be an easy way to access the funds you need.  On the downside, if you leave the company you'll need to repay the loan within five years, or face early withdrawal penalties of up to thirty percent.

Life Insurance
Some people borrow against their life insurance policies.  Using this plan allows you to borrow up to 96% of your policy amount, and you're only required to pay the interest.  This kind of home improvement financing can mean big money for minimum payment.  Of course, taking a loan on your life insurance policy will lessen your death benefits, so if you die before your loan is repaid, your family will receive a much smaller payout.

Precautions
There is many other home improvement financing options available to you.  Some are safe ways to borrow the money you need, but others are not.  Stock portfolios and Title One loans are two more possibilities.  The most important this to remember is to shop around to find the plan that will work best for you.  Always secure your loan before starting your home improvement project.  Be wary of lenders who are suggested to you by building contractors, in case there are "kickbacks" involved.   Finally, know all off the fees, charges and terms before you sign the dotted line, or you'll be left paying interest fees making payments long after the renovation job is complete.

In a perfect world, bank managers would hand over cash without batting an eye and homeowners could freely spend to turn their home improvement dreams into realities.  Then again, in a perfect world, your backyard would have had an Olympic-sized pool in the first place.