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I’m making home renovations – should I get a loan or a credit card?

Reviewed by Tanza Loudenback

You’re finally ready to upgrade your master bathroom, rehab your kitchen, or replace your leaking roof. The problem is, you don’t have enough cash to cover your home renovation project. No worries — you can borrow the money you need to pay for the improvements now, then pay it back later. You just have to decide which borrowing option is right for you.

Depending on your project, you can choose between a credit card or a loan. You should carefully consider the scope of your project before borrowing any money.

What’s your budget?

Start by thinking about how much money you plan to spend on your project. This isn’t the time to guesstimate — sit down and create a detailed budget that includes supplies, contractor fees, and a bit of wiggle room for unexpected expenses that will inevitably pop up. (They always pop up!)

Is your project going to cost $10,000 or less? A credit card may be all that you need to get things done. Are you looking at a bigger investment — $15,000 or more? A loan may offer you more funds at a more favorable interest rate.

What’s your repayment plan?

When borrowing any large sum of money, it’s critical to have a thought-out repayment plan if you don’t want your debt to snowball out of control. (And who would want that?) If you look at your current budget and realize you will be able to pay off your loan within a year, a credit card with an introductory zero-interest period may be the easiest and most cost-effective choice. This could also be a great option for racking up significant credit card rewards in a short amount of time. Hello, post-renovation vacation — you’re going to need it.

Need more time to pay off the loan? A loan will give you longer term, flexible repayment options with lower interest rates than credit cards.

What do you need for your renovation?

While you can pay for a lot of things with your credit card — new appliances, construction supplies, a fancy new bathtub — you may need a loan to pay for other expenses. For instance, if you’re hiring a contractor to manage your project, or multiple subcontractors, they may not accept credit cards for their services. In that case, you’ll likely need a loan to hire the help that you need.

Renovating your home is a major undertaking with many moving parts, but having a firm financial plan in place is the first step toward getting things done. Take the time to ensure you’re choosing the right financing options for you.

Thomas Donaldson is's credit card expert. His work has been featured by USA Today, NBC News, Business Insider and many more.

Tanza Loudenback is a CFP® certificant, writer, and editor. From 2015 to 2021, she was a top-read author and editor at Business Insider. Her work focuses on helping people make smart decisions with their money and is published by a variety of online publications. Full Bio

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