You may want to make some renovations around the house, but you don’t have the cash, and you know your credit score isn’t up to snuff. So how will you get a loan? Don’t let bad credit stop you from getting home renovations done.

There are ways around bad credit, and they’re easier than you might imagine. Take a look.



Home Equity Loans

This is, by far, the best scenario for getting renovations paid for if you have bad credit. That’s because a home equity loan is secured by the equity in the house. Equity is the difference between your home’s value and what you actually owe.

Say your mortgage balance is $150,000 and your home appraised at $250,000 you have $100,000 in equity. Why not put that money to work?

These loans are the easiest to get because your creditworthiness, while important, doesn’t mean you won’t qualify. It’s a and lenders are happy to use your house as collateral. In this scenario you receive the amount you apply for in a lump sum. You are free to spend the money on whatever home renovations you like.

How to Finance Your Home Renovations With Bad Credit

Home Equity Line of Credit

Also known as a HELOC this is another bad credit solution. It’s similar to the home equity loan in that it uses your home as security. Rather than receiving a lump sum, you are granted access to a predetermined amount of your equity over time.

Using the example above you might apply for a $50,000 HELOC. This money stays with the bank as revolving credit and is used by you as you need it. It’s like having a separate checking account, but one you have to pay back.

This is great if you’re planning a series of home renovations like a new bathroom, a new home gym, and a new kitchen. You can do the kitchen renovation, repay the amount, and then proceed with the bathroom and finally the home gym.

How to Finance Your Home Renovations With Bad Credit

Refinance Your Existing Mortgage

Another good way to get money for home renovations with bad credit is to refinance your existing mortgage, tapping into the equity in your home. Refinancing is possible with bad credit, although you could end up paying a higher interest rate than you would if you had good credit.

Lenders won’t let you take all of the equity in your home either, usually capping it around 90-95 percent. Your creditworthiness is part of the deciding factor, as is your debt to income ratio. In the above example you could refinance and pull out as much as $95,000.

How to Finance Your Home Renovations With Bad Credit

Budgeting for Home Renovations

It’s important to know how much your home renovations will cost you before securing a loan. You want to make sure you have enough money to complete the project, and you want to be sure you can repay the debt. Loan calculators can help with this.

Using the same example above, if your new kitchen will cost you $25,000 you wouldn’t need to use the full $95,000. Instead you should plan on borrowing $30,000 to give you enough to pay for the project plus any unforeseen costs. This will keep your payments lower.

How to Finance Your Home Renovations With Bad Credit

Ready To Apply?

If you’ve received quotes on your home renovations and are ready to move forward, what’s next? Check out our blog for tips on how to proceed, budgeting, green renovation concepts, and DIY projects you would rather leave to the professionals.


How have you financed your home revnovations?

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