The Best Home Improvement Credit Card
Using a credit card to pay for a home remodel, repair or upgrade is one of the easiest and quickest ways to get a home improvement loan, but it’s not always easy picking out the best home improvement credit card for you. There are lots of credit cards available that are specifically geared towards home improvements, but it’s sometimes difficult to decide which credit card is the best one to you for your particular home project or even if you should use a credit card at all.
The advantages to using a home improvement credit card are usually pretty obvious: you usually can get credit card points or special financing rates for using your credit card on certain types of home improvement purchases, including home appliances, tools, materials and more. And you can often get a credit card with an initial interest rate of around 7 or 8% depending on your credit history. With a home improvement credit card you usually have a fixed credit limit like $5,000 but you don’t have to use that entire amount of money. You can only charge what you need at the time and then pay off that amount, leaving the credit card open for other home improvements down the line.
When you go looking for a home improvement credit card online you’ll immediately notice that a lot of sites try to sell you a card right there or promote a certain card that they get a commission on. Instead of doing that we’re going to give tell you about the things you should consider when you are looking at home improvement credit cards. Ultimately the best home improvement credit card for you is the one that fits your individual situation and needs. Here are the different types of home improvement credit cards available in no particular order:
Home Improvement Reward or Points Credit Cards: There are lots of these “rewards” credit cards available from thousands of different banks. They generally work in one of two ways. They either give you credit card “points” which can be redeemed for home improvement items such as appliances or home contractor services or they give you special rates and incentives to use the card for home improvement projects and purchases. Most bank home improvement cards do a mix of both. Most bank home improvement credit cards are ultimately just Visa or MasterCard cards that can really be used anywhere and not just at home improvement or hardware stores. These reward cards can be good for home improvements, but you have to read the fine print to see what sort of fees are involved, whether or not the points “expire” after a certain period of time and what the rate of point accrual really is. If you need to spend $5,000 to receive a $10 gift certificate then that home improvement credit card is hardly worth it.
You also have to be careful to pick a rewards card that has rewards you actually want. I have a neighbor who signed up for a GM Rewards card thinking that he’d remodel his kitchen with the credit card and then use the points to get a discount on a new truck. After his kitchen was done being upgraded he want truck shopping and ended up buying… A used Chrysler PT Cruiser! All those GM points went to waste because he was tied into those points and ultimately didn’t want to use them. Most reward credit cards now have multiple options for rewards so you can still get gift certificates and travel bonuses even if that’s not your primary reward point system. A rewards card could be the best home improvement credit card for you if your project is big enough to earn points and rewards that you know you will use.
A Money Back Credit Card: Some credit card, like the Discover Card, will actually send you a check for a percentage of the money you spent in a certain time period. These are good cards if you know you’re going to use your credit card for a home improvement project and don’t want to bother accumulating points or worrying about whether or not you’ll be able to actually use your reward in the future. Most money back credit cards send you money either when your rebate hits a certain limit or after a specified period of time. The percentage you get back can also vary based on what you purchase. Some credit cards give you more money back for buying things like auto supplies, gas, groceries or other items with it. A cash back amount of 1% or 2% is usually pretty good for these money back credit cards. It may not sound like much, but it adds up quickly!
A Home Depot Credit Card: If you happen to have a Home Depot nearby that you can use for your home improvement, then this might be a better choice than a rewards card because you may save more money in the end. The Home Depot offers a lot of different home contractor services, so you may be able to actually have someone come in and do all the work and buy all the materials from The Home Depot. The Home Depot card is a popular home improvement credit card because they have a zero interest and no payments policy for six months on purchases of $299 or more. You just use the The Home Depot credit card for your entire home improvement or remodeling project and then pay the balance off as you see fit. This could be the best home improvement credit card for you if you think you’ll be able to pay off most of the balance in six months and like the idea of getting an interest-free home improvement loan during that time.
A Lowe’s Home Improvement Store Credit Card: If you typically shop at the Lowe’s Home Improvement Store chain rather than The Home Depot then you may want to consider several different credit card options from Lowe’s. They have a regular consumer Lowe’s credit card as well as a Lowe’s Project credit card. Each are aimed towards home improvement purchases for the consumer, but they have different payment terms and options, including a six month no interest option just like the Home Depot card. Like the Home Depot, Lowe’s offers a number of home improvement and remodeling contractor services as well as home improvement materials and tools. A credit card from Lowe’s may be the best option for you if you have a Lowe’s nearby and you plan to do most of your home upgrade purchases there.
Other Home Improvement or Hardware Store Credit Cards: Lowe’s Hardware Store and The Home Depot are obviously not the only home improvement and hardware stores in town. Many smaller hardware store chains offer their own credit cards and home improvement financing plans that can be just as competitive as the big stores. Some smaller home improvement store credit cards offer very low rates with longer zero interest payment terms. I’ve seen small hardware store chains offer 10%-20% off large purchases just for using their home improvement credit cards. Deals like this are not uncommon because it helps the smaller hardware and home improvement stores undercut the larger chains and bring in more business. If you’re going to use a small local store or if you can get some decent deals at a chain hardware store in your area then a home improvement credit card from that hardware store chain may be your best option.
Obviously knowing how much your home improvement will cost and where you’re going to purchase most of the materials and labor from will be very helpful. I strongly suggest going to different stores and getting free quotes on your home improvement project before applying for any specific home improvement credit card.
A home improvement credit card is essentially an unsecured loan that’s easy to use for home repairs and improvements where you don’t know exactly how much money you’ll need. If you have good credit and you’re looking for a home improvement loan of a specific amount, then you might want to try a low rate Lending Club home improvement loan.
It’s a quick and easy loan service that can get you the money you need quickly and easily. They’re free to join and have an online application, so you don’t have anything to lose. They’re a safe and secure company to deal with and they’ve won a lot of rewards for their loan service. If you want more information you can read our mini review of Lending Club.
Now you know what to consider when looking for the best home improvement credit for your situation. You can now weigh the pros and cons and ultimately feel confident when you fill out that credit card application that you are getting the best home improvement credit card for you!
Pay Off Your Home Improvement Loan With A Tax Refund
It is estimated that over 70% of all Americans get an income tax refund each year due to overpaying their income taxes on salaries, paychecks and other forms of income throughout the calendar year, and that money can go a long way towards paying off any existing home improvement loans you may have. And while loaning the government extra money is generally not a great way to get rich, there is an undeniable feeling of satisfaction in getting a large tax-free check from the government each spring!
One of the best ways to use that money effectively is to pay down an outstanding home improvement loan that you may have opened in the previous year. Here’s how this might work:
Let’s say in 2008 you applied for a home equity loan to perform add an addition on your house or to improve your home. For the sake of argument we’ll say that you took out a $10,000 home improvement loan in early 2008. This home upgrade will probably increase the value of your home which may allow you to borrow money for more home improvements in the future.
As the work on your home progresses and as you pay off your loan you are also paying some interest on the monthly loan payment. The interest might be around 6%. The interest that you pay on your home improvement loan in 2008 can often be used as a deduction on your 2008 income tax. So if you paid $500 in interest then in many cases you can deduct that from your gross 2008 income, which ultimately means you get a larger tax refund for 2008.
In 2009 you can then use your income tax refund to help pay down your home improvement loan, effectively getting rid of some of your debt. By taking out a loan for a home improvement in one year and using the tax refund from the next year to help pay it off you can sometimes afford to continually be improving your home while reducing the income taxes you owe and increasing the equity in your home.
Most home improvements cannot be used as a tax credit, but there are some exceptions to this, especially when it comes to home upgrades that are needed for a medical condition or for special energy saving home improvement project. Generally the interest paid on a home improvement loan or line of credit can be deducted from your income for tax purposes as long as the money is indeed used to improve your house.
Obviously, every tax and income situation is different and you may want to consult with a qualified tax professional to make sure this method of paying down home improvement loans will work for you.
How To Get A No Equity Improvement Loan
If you don’t have any equity or extra value in your home, but you need to upgrade or perform some improvements around your house, then you may be able to get a no equity improvement loan from a number of different sources.
These no equity home improvement loans are a growing segment of the loan market ever since housing prices started to tumble. First, lets explain how equity and home improvement loans work.
Bad News Is Good News for Home Improvement Loan Customers
If you’ve been paying attention to the news then you’ve heard a few conflicting reports about what is happening in the home improvement and financial markets. Here’s a quick explanation and analysis of what they could mean for you if you’re thinking about looking into a home improvement loan in the next several months:
International home improvement giant The Home Depot announced that they will be closing some of its stores and laying off nearly 7,000 employees. This sounds like awful news until you look a little further: the stores that The Home Depot will be closing consist of 34 Expo Design Center stores, 5 YardBIRDS stores, two Design Center stores and seven HD Bath stores. Those are all specialty stores with a lot of competition from local and smaller vendors. The Home Depot admitted that their Expo centers weren’t even doing well when the economy was good and there was a strong housing market. All the specialty stores affected will go into liquidation starting today, so there are some great home improvement deals to be found!
While the loss of jobs in the home improvement industry is never good, the recent cuts by The Home Depot show that their core business: discounted and affordable DIY home improvement supplies are still relatively strong because The Home Depot is not planning to cut any of those stores. This means that, essentially, home improvements are still a profitable and growing business and it means your Home Depot Credit Card can probably buy even more things for less money.
Our second bit of “bad news” comes from a report which says that housing sale prices dropped 9.3% to $198,600 in 2008. The prices haven’t been that low since 2004. This sounds like bad news until you hear that sales of existing homes actually rose 6.5% in December, which is traditionally a slow month for home sales anyway.
What does all this mean? It means that while existing homes did lose some of their value in 2008, the latest December numbers show that there is plenty of housing credit now available and it means that plenty of people are still borrowing money to buy homes. Because these are existing homes, a lot of that borrowed money will obviously be used to improve, customize or otherwise upgrade those homes. All in all it means that the credit market for small home improvement loans is clearly thawing and moving again.
Overall, if you bought your home before 2004 and if you’re looking for some good ways to stretch the money from a recent home improvement loan a little further, then this is all pretty good news for you. If you aren’t in one of those situations, then hang in there, the financial loan markets are opening up slowly. Your best bet for borrowing money to remodel or add on to your home may still lie in borrowing money from a local bank that hasn’t been negatively affected by some of the larger financial institution failings.
How the Federal Reserve Rate Affects Your Home Improvement Loan
If you’ve ever looked into getting any sort of loan for a mortgage or home improvement project you’ve probably heard talk about the Federal Reserve rate and how you may want to wait or move at a specific moment. But what does all this really mean? How can some big government institution like the Federal Reserve actually affect the rate of a home remodeling loan that you might apply for?
The Federal Reserve Board is government organization which does a number of important things, but one of the most high-profile monetary tasks of the Federal Reserve is to, in it’s words:
Open market operations–purchases and sales of U.S. Treasury and federal agency securities–are the Federal Reserve’s principal tool for implementing monetary policy… The federal funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.
Essentially, the Federal Reserve controls the rate at which banks and other lending institutions can borrow money themselves. Banks and other financial institutions that lend money for mortgages, home equity, and home improvement loans can then adjust the loans they sell up or down so that they can still make money.
Here’s an over-simplified example: if a bank can borrow $10,000 at 4.00% interest then they might be willing to offer you a $10,000 loan for a home remodel at 6.00% interest. As you repay the loan at 6.00% the bank would take the extra you paid, keep it as profit, and pay back the 4.00% on the loan. Essentially, the bank you borrowed money from is like a retail store with money: it “buys” money at 4.00% and it sells it to you at 6.00%.
This means that when the Federal Reserve rate is low you, as a home owning consumer, usually get better mortgage, home equity and home improvement loan rates. Of course, banks also have to worry about other things like loan default rates, paying employees, other market investments it may have and a variety of other things, so the rate at which they offer a home remodeling loan may fluctuate a fair bit from one day to the next.
Generally, when the Federal Reserve Board lowers rates most consumer loan rates, including home equity and home improvement loan rates, drop down a little bit. Likewise, when the Federal Reserve Board raises rates, loan rates go up.
Right now the Federal Reserve rate is at a historic low, which is just one of the many reasons why it’s a good time to get a home improvement loan.
It’s also important to note that the change in rates is not always immediate. Most experts in the financial industry say that it takes at least a week or two for banks to begin properly adjusting their rates and gauging market conditions before you may see the rates on things like mortgages and home improvement loans go up or down.
Obviously, your credit score, income and current home value will also play a part in whether or not you can get a good rate on a home improvement loan. The best way to find out more is to use a free home improvement loan calculator that can give you all the rates and details that apply to your specific financial circumstances.
Finance Your Home Improvements With Gift Cards
If you’re planning a big home improvement in the next couple of months, then one of the best gifts you can ask for from friends and family is a gift card to help you finance your home improvement! Big stores like Lowe’s hardware stores and Home Depot hardware stores offer all sorts of custom gift cards for just about any amount imaginable.
Home improvement financing with gift cards is a great way to give friends and family a chance to help you with your home improvements, whether it’s a much-needed home repair or simply a house upgrade you’ve been planning and saving a long time for.
Giving gift cards for home improvement projects is becoming common practice when people buy a new home or have a house warming party. Holidays and birthdays are close behind in reasons people buy gift cards to home improvement stores, but the reasons are really unlimited. As housing equity falls and people are stuck in the middle of home improvements without any way to pay for them, it makes sense to ask for gift cards that can help.
Obviously gift cards to places like Lowe’s hardware stores and The Home Depot are only good at those stores, but even if you give someone a gift card to one store they can easily be traded and exchanged for gift cards to other places for the same amount at numerous other places.
I’ve seen entire home improvement projects financed with gift cards from hardware stores. I know a woman who moved into a new home with a bathroom that was in terrible need of an upgrade. She had a house warming party and she purposely asked that people bring gift cards to the Lowe’s hardware store instead of bring bottles of wine or candles or anything else. She used all her gift cards and combined with the discounts she received from applying for a Lowe’s credit card she financed her bathroom upgrade and completely paid off the entire home improvements in just two months!
The best part of about using gift cards to help you with home improvement financing is that you can use the money for materials, labor, home improvement books or just about anything else those large hardware stores sell.
This means that you can not only use gift cards as part of your home improvement financing plan, but also as a way to buy new home improvement tools and materials. If you’re going to save some money on your home improvements then you’re probably going to plan to do it yourself and you probably don’t want your Aunt Bertha going out and picking a table saw for you. If she gives you a home improvement gift card, though, you can pick out exactly the saw you want without worrying about her picking the wrong model.
Financing a home improvement with gift cards is clearly another great way to help someone, or have others help you, easily pay for a home improvement
Financing Your Home Improvements May Solve Economic Crisis
With the housing crisis not getting any better in the United States and the world economy in turmoil a lot of people are confused about exactly what they should be doing, especially with regard to paying for that home improvement they had planned. One of the ways to help fix the economy and begin raising values, however, is with a large push towards small home improvements, largely financed on a personal basis.
Let’s examine the problems we have now. Housing values were high for a long time, but the housing bubble burst and values began dropping, leaving a lot of people without extra equity in their home. This meant that home improvements and home improvement loans stalled, which put a strain on a lot of companies rely on providing materials and products for new and upgraded homes. While the banks were losing money on the defaulted mortgages, the home improvement companies and the production facilities that make products for homes also started failing due to the slowdown. Stock prices are tied to company performance, so they obviously went down, too. Everything was tied together and it all started with the housing market grinding to a standstill.
Now we’re in a credit crunch and banks still don’t want to loan large amounts of money for home sales, but small loans, like those used to pay for and finance small home improvement projects, are still readily available from a number of places. You can still go down to your local Lowe’s and get a credit card and you can always finance your small home improvements through a personal loan from a local bank. And since these small personal home loans are still available, it means you can play a major part in reviving the economy and helping the housing market grow again.
Here’s how this will work:
The one way you can make sure that your home sells for more money is to put more upgrades and improvements into it. While some people may have cash on hand or even some home equity to do this, a better way is to finance your home improvements with a small loan. By using a small loan to pay for your home improvement you are helping to move money around and you will likely be able to afford more upgrades initially.
These upgrades and home improvements will raise your home value, but they will also increase the need for home products and services, which will increase the need for manufacturing to increase and will increase the number of jobs that need to be created to keep those companies meeting the demand for their products. As the demand for home products and services continues to rise, more people will have better jobs and more money and will be able to put more money towards buying a home! Your home, with all of its improvements, will naturally be worth more money and can be sold for a higher price and will have more equity built up in it if you need to borrow again in the future.
Imagine if every homeowner in America started upgrading their homes with money borrowed from some of the many home improvement financing options available out there! We’d suddenly have thousands of jobs and lots of home equity and value being created!
In fact, President-Elect Barak Obama recently announced his plans to form a large public works package which will essentially do exactly this, but on a larger scale. Instead of focusing on home improvements, he’s focusing on city and state infrastructure improvements. The more improvements that are done the more jobs there will be and with more jobs comes a stronger economy.
By financing that home improvement you’re not only increasing the value of your own home, but potentially helping other people keep their jobs and actually helping the entire world’s economy to grow stronger.
How To Get An Unsecured Home Improvement Loan From A Bank
If you’re looking to improve your home in some way with either basic repairs, some minor upgrades or even a complete remodel then you may need to consider getting a loan to pay for both the labor and materials involved. With the credit markets slowing down and with a lot of homes not having much equity it may initially be difficult to borrow the money you need for that home improvement project.
Sources of Home Improvement Loans During This Economic Downturn
The last few weeks have been rough on banks, financial lending institutions and other companies which typically loan out money to homeowners for all sorts of loans, including loans that can be used for home improvement. The economic downturn has crushed the housing market and, by extension, the home improvement industry and markets as well.
The simple fact is that many people lost a lot of their home equity with the collapse of the housing bubble and now many larger banks are stuck in a cycle of distrust when it comes to lending money to consumers and even each other. This means that if you need financing for a home improvement project or you need to borrow money to fix something in your house you may find that traditional big name mortgage and equity companies as well as national banks may not be able or willing to work with you.
There is hope, however. There are still some ways you can borrow the money you need to improve or add to your home without having to worry too much about the economic crisis that is hitting many institutions across the country.
Local Banks
Many of the national banks have been hit hard because they either directly or indirectly invested in subprime lending products which are now evaporating in value. Many small local banks avoid investing in risky enterprises and therefore are still doing very well. Local banks are more willing to help customers with home improvement loans because it’s helping community members improve the neighborhood and overall community, which leads to more people staying near the bank and using its services in the future.
Home Improvement Store Credit Cards
Big box hardware stores are suffering and need people to buy their products and keep their stores in business. One way they can sell more items is to offer competitive rates on their credit cards to keep people coming into their stores. Because these cards can often only be used at the stores that issued them these cards basically ensure that the hardware store will do well. Some hardware store credit cards like The Home Depot credit card even has a 0% interest rate for a limited time, so they are definitely worth looking into.
Financing Through Construction Contractors
When the number of home improvements are down due to a slow economy some of the people who suffer the most are the people who make a living working and improving homes. Roofers, electricians, plumbers and even landscapers are all reporting lower sales. Many of these contractors and self-employed workers will gladly offer payment plans to you for their services. They would rather be paid a little bit over each month and get the job of working on your home than risk not getting any work at all because no one can afford their services outright. Each contractor is different, obviously, but you’d be amazed at how flexible some home improvement professionals can be when it comes to payment.
Bartering
There are actually a lot of private individuals and even companies who are turning to bartering more and more as a way making a living and stay viable. For smaller jobs bartering services or even products can be a great way to have someone repair your home without actually spending any money. I have an elderly lady who essentially bartered here way into having a contractor replace all the windows in her home over the course of a year or so. She worked out a system where she would prepare meals for her contractor neighbor three times a week and in exchange he would do minor repairs around her home and keep and eye out for any materials he might find being thrown away. Sure enough he was working on a job where the wrong windows were ordered and they were put aside to be destroyed (for large jobs it’s often not worth sending things back). He was able to talk to the owner of the project who agreed to give him the windows. Several weekends later he installed them in the elderly neighbor’s house much to her surprise.
Just because the economy is taking a downturn doesn’t mean you can’t still improve your house and live in the home of your dreams. You need to think a little more creatively and outside the box, but you can definitely find some great ways to afford those home improvements even if we are in an economic recession.
A Home Improvement Loan Primer
When most people think of home improvement what home improvement is they think of all the little things around the house that they can improve or fix on their own without having to borrow money from a bank. But many home improvement projects require some sort of financing because they are large scale projects that require a large sum of money all at once. These larger home improvement projects require some sort of bank or lender issued home improvement money.
Larger home improvement projects that require financing could including adding an addition to your home, remodeling your home, upgrading the appliances and kitchen or bathroom, installing a new central air conditioner or furnace, replacing a roof or installing siding or simply putting in a new swimming pool.
Needed Repair or Luxury Home Improvement
There are a lot of different reasons for why you might need to borrow money to improve your home, but generally those reasons fall into the “need” or “want” categories. If your furnace needs to be replaced in the middle of winter that’s a need-based home improvement and in some cases a lender or home improvement contractor may actually be required by law to work with you in order to get your home safe for occupancy again.
If, however, you want to borrow money to put in a new pool or upgrade your home with more energy-efficient windows and doors then that is a “want-based” or luxury home improvement which you don’t necessarily need to live safely and comfortably in your home. Likewise, if you are trying to sell your home but know that you need to replace the flooring and roof in order to attract more potential buyers that is still a “want-based” home improvement.
Determining the reason you want to improve your home is almost as important as determining how you will finance your improvement. When you need to repair something you often need to place more emphasis on a fast approval process or simply being able to get the money in a timely manner. When you have more time to plan out your project then you can often shop around for the best deal and really weigh the pros and cons of each type of financial option you’re offered.
There are two general types of home improvement financing. There is an unsecured home improvement loan and a secured home improvement loan. When you are first looking at home financing you will have decide if you want a secured or unsecured loan. The differences are many, but here’s a general breakdown:
Unsecured Home Improvement Loan
An unsecured loan of any type is a loan you are taking out without any sort of collateral. Only your credit rating and income level are really considered for loan of this type. Home improvement credit cards fall into the unsecured home improvement financing category. Unsecured home improvement loans are meant to be paid back over a short period of time and will generally have a higher interest rate. The advantage to unsecured home improvement financing is you don’t need to have a home that has a lot of equity or “value above the purchasing price” to get this type of home improvement loan.
Secured Home Improvement Loan
A secured loan of any type is a loan which is backed with collateral, or something to trade, in exchange for the loan. For home improvement financing purposes that is almost always your home itself and any equity or extra value the home may now have. If you purchased a home for $100,000 but it will now easily sell for $150,000 then you have $50,000 in equity or value that you can use to finance home improvement projects. Secured home improvement loans have a lower interest rate and usually have a longer payoff period.
Don’t despair if you have bad credit and wish to finance a home improvement project. Even people with bad credit can get a home improvement loan if they follow a few common sense steps and are willing to pay a higher interest rate or borrow a little less money than they might normally want to borrow.
If you’re serious about borrowing some money for those needed home improvements, then you should definitely consider using a free no-obligation home improvement loan calculator to find out exactly what kind of loan terms you may qualify for. The process doesn’t cost you any more than a few minutes of your time and it helps you get an idea of how big of a home project or remodeling you can afford.