Cash-out refinancing can be an affordable, fixed-rate option for financing your home improvement project but the process may take considerably longer than it would have during pre-pandemic days and the requirements may be more stringent.
3. Personal Loans
What is a Personal Loan and how does it work? Personal loans are unsecured loans that you receive as a lump sum of cash to use however you like. They typically have fixed rates and terms, which means you pay the loan back in set installments over a set period of time.
What are the Pros and Cons of a Cash-Out Refinance?
- Fast funding — approval process is fast and usually 100% online
- Renters, homeowners concerned with foreclosure risk — available regardless of housing status
- Fixed scope of work — lump sum of cash makes it harder to overspend on your project
- Better rates than other unsecured options — rates are generally lower than traditional credit cards
Not Great For:
- Projects with ongoing expenses or unclear scope — lump sum of money can only be used once without borrowing again. May result in additional hard inquiries and a negative impact on your score if you need more credit
- Paying less interest — you pay interest on your total outstanding balance, regardless of how much you’ve spent
- Some homeowners — rates are typically higher than secured options
Bottom Line on Personal Loans
Personal loans are a fast and affordable way to borrow a set amount of money. This may be a good fit for a project with a set budget or a lot of one-time, up-front cost.
4. Traditional Credit Cards
What is a traditional credit card and how does it work? Most of us are familiar with traditional credit cards. They are revolving lines of credit, which means you can spend up to your credit limit, and then pay back your outstanding balance and spend again. They can be used wherever credit cards are accepted, and some offer (expensive) cash options as well.
What are the Pros and Cons of a Traditional Credit Card?