By Watercress Financial
As a homeowner, navigating the many financing options for your next remodeling project can feel overwhelming. If you're currently exploring financing options for your upcoming remodeling project, you're not alone!
A home improvement loan is a type of monetary loan used to fund a home upgrade. These loans are funded up-front by a third-party lender, allowing you to pay off the project in flexible monthly payments with an interest rate that will remain the same throughout the life of the loan. One advantage of home improvement loans is their competitive interest rates with instant approval decisions – making them quick to obtain. Home improvement loans can also be less risky, as you are not utilizing your home’s equity. HELOCs and HELOANs are also usually associated with fees and costs that can be avoided with a home improvement loan. Home improvement loans may also be the preferred choice for financing smaller projects, as HELOCs and HELOANs typically require you to borrow a minimum of $10,000.
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According to an article from the CFPB, a HELOC, or Home Equity Line of Credit, is a line of credit based on your home’s equity, with a variable interest rate, therefore, your monthly payments may vary. A recent Bankrate article explains that a HELOC includes the ability to use the funds as you need them, repaying only what you borrowed. A tax deductibility may also be possible with a HELOC, but it is essential that you take the time to consult a tax advisor to see if you qualify – as this is not available to everyone. Since your home secures a HELOC, your property can be at risk of foreclosure if loan payments are not made. HELOCs may take increased time to get approved due to application fees, origination fees, and other costs. The balance on your HELOC also reduces the equity in your home, meaning there will be less net cash on the future sale of your home.
Similar to a HELOC, a HELOAN (or Home Equity Loan), is also a debt that is secured by your home and based on the equity in your home. Unlike a HELOC, a HELOAN can offer you a fixed interest rate, providing consistent monthly payments. Most of the cons of HELOCs will also apply to HELOANs.
One of the best aspects of homeownership is the freedom to explore your options and make financial decisions that best suit your personal needs. Planning a remodeling project can feel stressful, can help you feel more informed on your financing options and can help you make a decision that aligns best with you and your home.
If you have questions about home improvement loans and the types of loans Watercress Financial offers, visit our Homeowners Guide to Home Improvement Loans blog to learn more! 
Sources:
https://www.consumerfinance.gov/ask-cfpb/what-is-a-home-equity-line-of-credit-heloc-en-107/
https://www.investopedia.com/mortgage/heloc/home-equity-vs-heloc/
https://www.bankrate.com/home-equity/pros-cons-of-home-equity-lines/
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