Home Improvement Loans: Pros & Cons

by | Sep 24, 2020 | Remodels

It is time: you have finally had enough of your outdated kitchen or bathroom. Or maybe your roof needs replacing. Or maybe you want to add onto your home because your family is growing.

Whatever the reason, home remodels do come with a price tag. Not everyone has wads of cash lying around on hand. Let’s explore our loan options and the good and the bad that may come with them.

Secured loans

These loans use your home as collateral. Two examples of this type of loan are a home equity loan or a second mortgage. Read more about the specifics of these loans here.

There are a lot of benefits to be gained from taking out secured loans such as:

  • Higher loan amount
  • Fixed interest rate
  • Longer payoff term
  • Tax-deductible interest

On the flip side, there are a couple of drawbacks:

  • If payment defaults, you risk foreclosure on your home
  • Loan terms may prevent future rental income opportunities

Unsecured loans

These types of loans do not require collateral. Instead, the qualifications focus largely on your credit score.

Here is a breakdown of the pros and cons concerning unsecured loans:


  • Less risk for the borrower
  • Does not require a build-up of home equity


  • Higher interest rates
  • Lower payoff terms
  • Not tax-deductible

Credit cards

Many homeowners have found that it is easier to use their personal credit cards to finance home improvements.

However, there are a few things you should know should you choose to go this route.

  • Credit cards usually come with a higher interest rate and lower credit limit
  • You could easily put your credit at jeopardy if you start missing payments
  • You are using credit that should probably be saved for emergencies


Whichever option you choose to finance your home improvements, make sure you heavily weigh the pros and cons. And remember, cash is king. If you can wait and build up your savings, this is always the best way to go.