Pros and Cons of Using Home Improvement Financing Companies

Shubham Kumar Shubham Kumar
Dec 2, 2020 4 min read
Pros and Cons of Using Home Improvement Financing Companies

For a homeowner, making improvements to their home and making makeshift changes to its existing structure can be inevitable. Sometimes, it can be a headache to live with a few elements of your home.

This could be a boring paint color or an impractical bathroom design. You may need to make improvements to these elements if you want to live comfortably at your home.

Fortunately, you can take assistance from various home improvement financing companies for such high finance jobs. Such companies can extend a line of credit specifically meant for the purpose of home improvement. However, as a prospective remodeler, you should account for the pros and cons of such home improvement credit sources.

Let us explore the specific pros and cons associated with the service of home improvement financing companies.


The first major benefit of taking a loan, specifically for the purpose of home improvement, is that you can choose from a variety of loans. Different finance options cater to requirements for every size and price of home improvement projects. Since such loans seek to fit the scope of all individual projects, you will find one for updating lighting separate to one meant for remodeling a kitchen.

Obtaining a secure form of home improvement finance can help you obtain larger sums of credit. Since you will be putting up something in collateral, undertaking a larger home improvement project becomes possible. In contrast, you can also opt for unsecured home improvement credit for smaller projects such as a paint job or upgrading some home appliances.

Since they do not require a large sum of money, it is possible to do away with some credit to get them complete, without putting up anything in collateral.

Usually, a line of credit meant for home improvement purposes tends to have a longer payback time. Moreover, the rate of interest applicable to such credit is usually lower than credit meant for other purposes.

In addition, loans taken for this purpose offer the added advantage of offering a fixed rate credit, which is locked at the time of taking such loans. Hence, it is easy to manage and service for you as compared to other types of loans.

You have the option to avail of facilities like HELOC, which is a home equity line of credit. It is most suitable for you if you are planning to keep the money for a longer duration of time.

Basically, it is a credit card with which you can utilize a hefty amount of limit and, in turn, make monthly payments on the outstanding balances. Ideally, it is up to you to plan how and when you want to payback for the borrowed credit.

If you are using a home improvement credit option to apply it at the right project and the right price, you will benefit immensely from your decision in the long run. Raising money to make a home improvement at a considerable scale will bring you the benefit of raising your property value, which you can sell at a later date.


Taking credit for home improvement does not come without risk. If at all you miss completing repayment of the due amount at the time when it is actually due, you stand the risk to impact your ability to borrow further. It is a bad financial activity which can cost you significantly later.
To obtain a secured credit option to improve your home, you may be using your home itself as collateral. However beneficial this option may be for you, you are using your home as equity to support the credit. In case you were to default on the repayment of your dues, not only will you bring a bad impact on your credit standing but also risk losing your home.

When it comes to credit options like HELOC, the rate of interest which you are able to avail may be tied up with prime rates. Any financing company is likely to provide a good interest rate only to their most creditworthy customers. This makes the interest rate applicable to HELOC highly susceptible to market conditions and your credit history.

HELOC interest rates are comparatively low, and the home improvement financing company won’t have any claim on your property, but this is a major drawback of credit obtained through this source.

The ability of a credit taken from a home improvement financing company depends largely on factors, which are external to your area of control. The final financial reward waiting for you may be a negligible one if the real estate industry is not booming at an optimum rate when you are done with the remodeling or upgrades.

Further, if you plan to undertake a specific remodeling project which requires expert supervision, you may need to hire someone qualified to look after it. This will further push the costs upwards since it is always better to find the right advice before you fall into a poorly remodeled pit of liability.

Home improvement financing companies may offer different sources of credit, but there are few tax advantages associated with them. The rules about home improvement credit for the purpose of tax deduction may vary to a great extent and may not provide enough benefits.

In Conclusion

Home improvement loans can be largely beneficial for you if you need to undertake major repairs and upgrades to your property, such as HVAC financing for contractors. While a strategic expense may increase the value of your property manifold, the economy comes to play a major role when it comes to making the final impact.

Taking the service of a home improvement financing company may help you complete an essential upgrade or repair, for which you may have to save a lot of money and wait for a long time otherwise. In return, this delay may increase the damage to the structure and demand an even costlier repair expense at a later date.

Hence, while there are some cons attached to the credit extended by a home improvement financing company, it is also a viable option for many.

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