Taking on a home improvement project can be both exciting and stressful at the same time. And that’s especially true if you have questions or concerns about your budget and how you’ll pay for the project.
Early on, there’s an important question to answer: is it best to pay with cash or take out a loan?
For some people, cash isn’t an option. But for others, they have enough money in the bank to make for a difficult decision.
Here are some of the many benefits of paying for a home improvement project with cash:
- No loan payment: You don’t have to worry about making a loan payment every month. Instead, once you pay in full there’s no additional financial obligation.
- No interest: When you borrow money from a bank, you’re required to repay it with interest.
- It’s fast: There’s no loan application process to bog you down. This allows you to proceed with your project in a timely manner.
Now, let’s review some benefits of using a loan:
- Keep your cash reserves: Depending on how much you have in savings, you may not want to deplete your funds. With a loan, you can keep your cash reserves intact.
- Tax advantages: For example, if you opt for a home equity loan, you may be able to deduct the interest paid.
- More flexibility: You may be able to borrow more money than you have in cash. This gives you the flexibility to get everything you want out of your project.
With benefits like these, it’s easy to see why so many people get caught up on this detail as they plan a home improvement project.
How to Decide
There’s no right or wrong answer as to whether you should pay cash or use a loan for a home improvement project. The decision is yours to make and should be based on your financial circumstances and comfort level with each option.
Here are some questions you can answer to help you decide:
- Do you have enough cash on hand to pay for your project in full?
- Do you have concerns about draining your bank account to pay for the project?
- Do you qualify for a loan, such as a home equity loan or personal loan?
- Are you okay with the idea of adding a monthly loan payment to your budget?
- Are you familiar with the terms and conditions of the type of loan you qualify for?
As you prepare to tackle a home improvement project, strongly consider the pros and cons of paying with cash and securing a loan.
Once you know what’s best, you can take the next step in kicking off your project.
How did you pay for your last home improvement project? Were you happy with the decision you made? Looking back, would you do anything differently?