4 ways to borrow the money you need for your next home improvement project

Business Insider may receive a commission from The Points Guy Affiliate Network if you apply for a credit card, but our reporting and recommendations are always independent and objective. A home improvement project may be a smart way to avoid a pricey move across town, but that doesn't mean your project will be cheap. Due to the high price of remodeling, many people wind up borrowing the cash they need. Home equity loans and personal loans come with fixed interest rates, fixed monthly payments, and fixed repayment terms, making them a good option for homeowners who hate surprises.If you only need to borrow a small amount of money for your project and think you could repay it in less than 15 months, consider a 0% APR balance transfer card that offers zero interest on purchases. To execute this strategy without losing your shirt, however, you will need to pay your balance in full before your introductory offer ends.Dreaming of a new kitchen？ A master bathroom with double sinks？ A room addition to give your family more space？ These are all worthwhile goals that could improve the value and utility of the home you have now versus having to move. The problem？ Home improvement projects aren't cheap, and in some cases, they can be downright expensive.According to Remodeling Magazine's 2018 Cost vs. Value Study, the average mid-range kitchen model rang in at $63,829 in 2018. Even the average minor kitchen remodel cost consumers $21,198.Want a new deck？ A wooden one would set you back an average of $10,950 last year, while a mid-range backyard patio came in at a cool $54,130 on average.You get the point. Remodeling your home can be a pricey affair — even if the result is worth it in the end. For that reason and others, many consumers opt to borrow the money they need to complete these important projects.If you're gearing up for a big project around the house this spring and know you need funds to make it work, make sure to research your options ahead of time. Here are the most popular borrowing options for home remodeling projects this year:Home equity loanHome equity loans allow you to borrow a lump sum of money while using the value of your home as collateral. You can typically only borrow up to 85% of your home's value, however. If your home is worth $300,000 and you have a first mortgage for $200,000, for example, 85% of the home's $300,000 value is $255,000. Since you've already borrowed $200,000 of that value with your first mortgage, you would likely only be able to borrow up to an additional $55,000 with a home equity loan.Home equity loans come with a fixed interest rate and fixed repayment term, which means you'll also get a fixed monthly payment that never changes. You can also borrow money for up to 30 years, and the interest may be tax deductible if you itemize on your taxes and use the money to make substantial improvements to your home.Read more: A second mortgage can be a low-cost option for homeowners in need of cash, but they have 2 options to choose fromNote that if you're considering a home equity loan, you'll want to compare offers yourself. According to the Federal Trade Commission, there's a known scam around home equity loans where a contractor or builder shows up at your door and offers their services on a renovation project for what seems like a good price, and offers to help you finance it through someone they know. This “someone” may end up being a lender offering a home equity loan with unfavorable terms that aren't disclosed until after the work has begun.If you decide to pursue a home equity loan, do the research yourself.Pros of home equity loans:Predictable monthly payment, loan term, and interest rateBorrow up to 85% of the value of your homeMany home equity loans have low fees or no feesCompetitive interest ratesCons of home equity loans:You're putting your home up as collateral, so you could lose your home if you fail to repaySome home equity loans do have feesYou need a lot of home equity to qualifyBest for:Consumers who need to borrow a large sum of money and pay it off over timeAnyone who wants a fixed monthly payment and no surprisesPeople with considerable home equity to borrow againstWhat kind of mortgage rates could you get？ Consider these offers from our partners:Home equity line of credit (HELOC)Home equity lines of credit, which are also called HELOCs, work similarly to a credit card. They work as a line of credit you can borrow against, and you only have to repay the amount you actually use. Like credit cards, HELOCs typically come with variable interest rates that are based on an index and may change over time.Since HELOCs use your home as collateral, interest rates tend to be lower than other unsecured loan options. Keep in mind, however, that you can typically only borrow against your HELOC during an initial draw period that normally lasts 10 years. After that, you'll move into a repayment period where you can no longer borrow money. Pros of HELOCs:Only borrow what you needCompetitive interest rates based on an indexMany HELOCs come with low fees or no feesYou may be able to deduct interest on your taxes if you use the funds for major home improvement projectsCons of HELOCs:Your payment will fluctuate based on how much you borrowVariable APR has the potential to surgeYou need considerable home equity to qualifyBest for:Consumers who aren't sure how much they need to borrow for their projectPeople with considerable home equity to borrow againstAnyone who wants a loan with low fees 0% APR balance transfer credit cardWhile regular credit cards are a poor option for any project since they come with an average APR over 17%, balance transfer cards that offer 0% APR on purchases can be ideal for small home improvement projects. Keep in mind that some balance transfer cards only offer 0% APR on balances transferred from other cards or loans, so you'll want to look for cards that extend the 0% APR to purchases, too.There are a surprising number of 0% APR credit cards that fall into this category, including options that offer zero interest on purchases for up to 15 months. You can even earn rewards on your home improvement purchases with some cards in this category.With the Wells Fargo American Express® Card, for example, you get 0% APR on purchases for 12 months and 30,000 points worth $300 after you spend $3,000 within three months of account opening. (then a variable APR of 16.24% to 27.24% applies) You'll also earn 3x points on eating out and ordering in, gas stations, ride shares, transit, and travel along with 1x points on all other purchases — and all without an annual fee.Pros of 0% APR credit cards:Enjoy zero interest on your home remodeling purchases for a limited time, usually up to 15 monthsSome cards that offer 0% APR for a limited time also let you earn rewardsBalance transfer cards are easy to research and apply for onlineCons of 0% APR credit cards:Your interest rate will reset to the standard APR after your introductory offer is over; this could be as high as 24.99%You only get 0% for a limited time, making this a poor option for people who need years to pay their home remodeling project offYour monthly payment will surge based on how much you spendBest for:People who need to borrow a small amount they can repay in 15 months or less (before their interest rate resets)Consumers who want to earn rewards on their home improvement spendingSomeone who wants to leverage their project to earn a sign-up bonus on a credit card that also offers 0% APR on purchasesLearn more about the Wells Fargo Propel from our partner The Points Guy »Personal loanPersonal loans are also popular for home improvement projects since they offer some of the benefits of home equity loans without as much risk. Personal loans are unsecured, meaning they don't require you to put down any collateral. This means that, if you fail to repay, you're not putting your home on the line like you would with a home equity loan or a HELOC (even though you will negatively impact your credit score).Read more: Personal loans 101: How they work and who can qualify for themPersonal loans also come with fixed interest rates, fixed repayment timelines, and fixed monthly payments — meaning you won't have any surprises along the way. Also note that, since you're not borrowing against your home equity, you can take out this type of loan regardless of how much you owe on your mortgage provided you meet other requirements your lender sets.Pros of personal loans:Fixed interest rate and monthly paymentYou don't have to put your house up as collateralYou may be able to borrow more since your loan limit isn't based on home equityCons of personal loans:Interest rates may be higher since these loans are unsecuredSome personal loans charge fees, although many do notThe best rates and terms typically only go to those with good or excellent creditBest for:Consumers who want to remodel their homes but don't have a ton of home equityPeople who need to repay their loan slowly over timeAnyone with good or excellent credit who can qualify for the best offersThinking about a personal loan？ Consider these offers from our partners: