Starting that renovation you’ve always wanted is exciting, isn’t it?

However, you’ll also probably agree with us when we say:

Renovations are really scary. You’re paying people you don’t know tons of money to make major changes to your home.

Of course you expect minor hiccups, but you can’t shake the lurking fear of a renovation nightmare because you know someone who’s project descended into disaster.

Like other smart homeowners, you realize you can increase the odds of success by:

  • Researching your contractor on a site such as BuildZoom.
  • Verifying your contractor’s insurance with his provider.
  • Getting an inspection to find problems that may surface during your renovation.
  • Preparing a detailed contract with costs spelled out.

But you may not realize there’s another major step you can take to protect your dream project from a renovation nightmare.

Taking this step will prove to your contractor–and to yourself–that you’re serious about success.

This step is making the right decision about how to pay for your renovation.

That’s obvious!”, you’re probably thinking, “Of course I’m going to research payment options and make the best financial decision I can.”

We’re not stating the obvious. Here’s why:

Most financial experts don’t know enough about remodeling to understand how financing affects your project, while many home improvement pros don’t understand finance enough to help you make the right decision for your bank account.

This disconnect means few homeowners learn how bad financing decisions put their remodels at risk.

Give us just a few minutes, and we’ll show you how to lower the danger of a renovation nightmare by picking the right payment option.

You’ll learn how picking the right financing for your remodel helps you avoid:

  • Contractor problems
  • Foreclosure
  • Too much debt

Lower Contractor Risk

If one part of your renovation keeps you up at night, it’s probably the risk of contractor problems.

You can encourage your contractor by finding a payment option that approves and pays you quickly. Let’s start by looking at what motivates your contractor:

Unsurprisingly, your contractor’s top priority is getting paid.

Many contractors struggle to make ends meet. A recent Harvard study found that every year, one in five remodeling companies closes its doors. Profits aren’t very high for remodeling businesses–many make less than $100,000 a year.


Low profit margins explain why, if you can quickly access the funding you need, you can reduce several renovation risks such as:

The Slacker

We’ve all heard of contractors that show up next week for a task that should be completed today. These delays cost time, money, and raise your stress level.

Showing your contractor you can quickly get the money to pay incentivizes speed and high-quality work. Even though you should pay in installments with an upfront down payment, your contractor will still like that you have the funds for the entire project. Some payment options, such as personal loans and credit cards, approve and pay you rapidly after you apply.

Encourage timely work by following these steps:

  • Research how much your project will cost. Also speak with multiple contractors.
  • Show your contractor that you can access financing to pay for the project.
  • Consider adding penalties into your contract, where he loses money $50 to $100 for every late day. You should get your home pre-inspected to know if any pre-existing problems will cause delays.
  • Apply for financing and, when you get your money a couple days later, show proof to your contractor.

The Overpriced Bid

A Consumer Reports survey of general contractors found at least 66 percent are at least somewhat willing to negotiate a lower bid. You can avoid overpaying for your project if you play your cards right.


Pick the right payment option, and you have an ace up your sleeve while negotiating costs.

For example, personal loans let you quickly access cash, incentivizing your contractor to give you a discount in return for an immediate down payment. Of course not all contractors will give you a discount–but getting money quickly gives you leverage to negotiate one. Contractors also frown upon credit card processing fees, so if you can pay with checks, you gain more power during negotiations.

Remember getting lower bids isn’t always a good thing. Many contractors underbid, then add fees on throughout the project–a bigger risk than if you just accepted a higher bid from the start. Nevertheless, if you research your project and vet your contractor, then you should confidently accept a lower bid.

Here’s how you can use your payment option to keep more hard-earned money in your pocket:

  • Research your contractor to reduce the risk of a scam.
  • While discussing your budget and project costs with your contractor, use Hearth to show how much money you can quickly get.
  • Ask your contractor for a reduced price in return for an immediate down payment after signing the contract.

The Delayed or Cancelled Project

Good contractors face increasing demand for their time because home improvement spending in metropolitan areas is expected to grow by 7% this year. That means, if you have to wait weeks for HELOC approval, then there’s a chance you’ll lose your contractor because he took another customer.

How Long Does Each Payment Option Take?

Times vary by payment option:

  • Lenders that issue personal loans, which are zero-collateral options with relatively low rates, take between 1 and 14 days to approve and transfer money.
  • Credit cards, which also usually don’t require collateral, also take 1 to 14 days.
  • Home equity lines of credit (HELOCs) and home equity loans, two payment options that require your home equity as collateral, take anywhere from 4 weeks to 3 months to approve.

Prevent Foreclosure


You may have an A+ contractor, but your payment option could still cause problems.

Your renovation could face the most serious risk of all: losing your home.

You can lose your home when you choose collateralized options such as home equity lines of credit (HELOCs) and home equity loans. Banks take equity in your home in return for low rates, so your bank can foreclose your home if you default.

Careful planning doesn’t completely protect your home because you could face unexpected events. One Washington Post reader found himself at risk of foreclosure when he lost his job. He could afford primary mortgage payments, but could no longer pay his HELOC bills. His home was still at risk.

How Do I Renovate Without Risking my Home?

The best way to protect your home is to use a zero collateral payment option. For example, personal loans offer low rates without putting your home on the line. Personal loans may also cost less than collateralized options because, even though a home equity loan likely has lower rates, you pay interest for 30 years.

If you have a massive remodel, a collateralized loan may be your only financing option. Many banks would be unlikely to lend more than $100,000 without collateral.

Avoid Piles of Credit Card Debt

Like personal loans, credit cards don’t require home equity as collateral. You can pay for a renovation with a credit card without fearing foreclosure. They often make sense for low-cost projects such as a paint job. You can also get credit card points, which unlock unique offers.

However, credit cards can create another renovation nightmare: a debt avalanche.

Credit cards often offer 0 percent interest options for 12 to 18 months. But if you cannot pay off the card by the end of this introductory period, then your interest rates can soar. You can also face hidden fees, so carefully research all potential fees before your renovation.

Nevertheless, for small projects you can pay off quickly, a credit card may be your best option besides cash.

Credit cards also lure you into going over budget. It's tempting to max out your credit card during your renovation to finance attractive upgrades. But maxing out increases your debt burden and blocks you from using the card for other reasons.

Selecting a personal loan can help you avoid credit card pitfalls because:

  • Rates are often lower than those on credit cards after introductory periods end.
  • You get the entire amount you qualify for upfront, helping you think through your budget and research costs before the renovation starts.


Picking the right payment option won’t eliminate the risks of a renovation nightmare, but the right choice brings your project closer to success.

Success is a Thanksgiving dinner in your new dining room. Success is a Super Bowl party in your luxurious living room. Success is the trip to Hawaii you can afford after selling your home for a higher resale value.

Learn more about paying for your project by reading our article comparing renovation financing options.