How to know you're financially prepared to remodel your house

Being confined to your home during the coronavirus pandemic may have opened your eyes to the endless ways to improve it. But home improvements can be costly, and how do your know when you’re financially ready to take on such a project? Find out how m (iStock)

Being confined to your home during the coronavirus pandemic may have opened your eyes to the endless ways to improve it — swapping out that old, worn-out carpet for hardwood floors or updating your kitchen cabinets. Maybe you’ve thought about remodeling the extra bedroom into a new home office now that you’re working from there.

While the thought of remodeling can be exciting, it can also be stressful, especially when it comes to working out how to pay for it. A personal loan can take some of the pressure off your finances. However, knowing how much to borrow comes down to your needs and budget. Consider these four steps to help you better understand what you'll need to do to take on remodeling your home:

  1. Evaluate what you want to remodel in your home
  2. Get initial estimates
  3. Allow for extra costs
  4. Use a personal loan calculator

If you're considering a personal loan, use an online marketplace like Credible to make sure you’re getting the best rate and lender for your needs.

HOW TO FIND THE BEST PERSONAL LOAN FOR YOUR NEEDS

Evaluate what you want to remodel in your home

Remodeling is rarely as simple as you’d expect. Do you want to give the room a fresh new look or does that kitchen just not function as well as it once did? And although updating your kitchen might be at the top of your remodeling list, you should first consider what you want, what your budget is and whether you’re planning to sell your home soon or stay there for years to come.

Do you want to replace just the kitchen countertops or is this a major kitchen remodeling project with all new flooring, cabinets, fixtures and appliances? Knowing your end goal and measuring it against your budget will help you decide how deep to go with your remodeling project.

Get initial estimates

Whether you’re replacing the carpet in the living room or revamping your entire living space, it’s best to have a basic budget in place. A DIY home renovation can save you money but it can turn into a mess if you’re unsure what you’re doing. Knowing which tasks you can tackle and which should be left to the experts can save you a lot of stress in the long run.

Licensed contractors and builders are happy to give you a quote. And getting estimates from more than one contractor will provide you with a better idea of the average cost and help you negotiate the final price of your house remodel from start to finish.

You’ll also want to monitor the bills and cost of materials and ask your contractor about any discrepancies you find. If you buy upgraded materials through your builder, you may also pay an up-charge compared to purchasing the upgrades yourself.

If you need help paying for your home renovation project, a personal loan might be the way to go. With Credible, you can compare rates and lenders instantly to find a loan term and amount that works for you.

SHOULD YOU TAKE OUT A PERSONAL LOAN FOR HOME IMPROVEMENTS

Allow for extra costs

Sticking to your budget is one of the most important parts of remodeling your home. That’s why it’s a good idea to factor in any unexpected extra costs during the remodel, like eating out or staying in a hotel for a night or two. Building permits, which can be costly, may also be needed in order to complete the work you have in mind.

Likewise, when you pull up the carpet to add new wood flooring, you may discover a crack in the subfloor. Or when installing a new shower, you find a small leak and realize the plumbing needs repairing. Extra costs can add up so figuring in some contingency into your budget is a good idea to avoid sticker shock.

Use a personal loan calculator

Interest rates on personal loans are typically lower than with credit cards, making personal loans a great option for all your home improvements. Rates and terms vary from one lender to the next but borrowers with good credit will likely secure a much better APR than someone with poor credit.

To give you a better idea of what your monthly payments will be so you can plan your budget and see what you’ll pay in principal and interest over the life of your loan, use a personal loan calculator. That way, you borrow only what you need and don't have to dip into your savings or retirement funds to cover the cost.

HOW TO PAY FOR A RENOVATION WITHOUT USING YOUR HOME EQUITY

Next steps

If you’re applying for a personal loan to fund your home improvement, it pays to shop around and compare rates and lenders at Credible first. That way, you can be confident you got the best rates and terms to fund your home improvement project and maximize your budget.

Then you’ll want to estimate the total cost (allowing for any extras) for your home improvement project and get pre-qualified with your lender. If you have questions, visit ​Credible to get in touch with experienced loan officers​ and get all of your personal loan questions answered.

WHAT SHOULD YOU USE A PERSONAL LOAN FOR?