Financing Home Renovations: Home Improvement Loans vs. Credit Cards

4-minute read | Nov 21, 2023

A recent survey found that over the next two years, homeowners anticipate they’ll spend an average of $7,746 on home repair and improvement projects.

However, with the fears of a looming recession and a challenging economy, many wonder how they will pay for these repairs. 34% of respondents stated they plan to use a credit card, which is a nearly 5-fold increase in credit card usage compared to the previous year’s findings.

Financing home improvement projects with loans vs credit cards

As a home improvement professional, understanding the pros and cons of financing a project with a home improvement loan vs credit card can position you as a helpful guide to your customers, which may help you win more projects. Keep reading to learn more about the advantages and disadvantages of your customers using credit cards to finance a project with you.

Credit Cards: The Pros and Cons


  1. Convenience: Credit cards offer unparalleled convenience when it comes to making purchases, including those related to home renovations. Your customers can quickly pay for services with a swipe or a tap.
  2. No Collateral Required: Credit cards generally do not require collateral, unlike home improvement loans. This means your customers won’t have to put their home or other valuable assets on the line to secure financing.
  3. Interest-Free Period: Some credit cards have an interest-free introductory period. During this period, your customers can make purchases without incurring interest charges if they pay the balance in full each month.


  1. High-Interest Rates: Credit cards often carry high-interest rates, particularly if a balance is maintained beyond the interest-free period. Over time, these interest charges can accumulate and significantly increase renovation costs.
  2. Limited Credit Limit: The credit limit on your customer’s card might only cover part of their renovation expenses, forcing them to use multiple cards or seek additional financing.
  3. Minimum Monthly Payments: Credit cards offer flexibility, but they also require customers to make minimum monthly payments, which can become a burden if you can’t pay off the balance swiftly.
  4. Processing Fees: Many credit card processing vendors charge businesses a fee to process the transactions.

Home Improvement Loans: The Pros and Cons


  1. Lower Interest Rates: Home improvement loans typically offer lower interest rates compared to credit cards. This can translate into substantial savings in interest costs over the life of the loan.
  2. Fixed Repayment Terms: With a home improvement loan, your customers will have a predefined repayment schedule, making it easier to budget for the project’s costs over time.
  3. Higher Loan Amounts: Home improvement loans often allow customers to borrow more, making them well-suited for substantial renovations or complete home makeovers.


  1. Collateral Requirement: One of the primary drawbacks of home improvement loans is that they are typically secured by their property.
  2. Application Process: Applying for a home improvement loan can be a more involved and time-consuming process compared to obtaining a credit card. It often entails gathering financial documentation, meeting lenders, and navigating a more comprehensive approval process.
  3. Immediate Interest Accrual: Unlike credit cards with an interest-free grace period, some home improvement loans start accruing interest immediately after your customer receives the funds.

When customers try to choose between a home improvement loan vs. credit cards for their renovation project, it ultimately depends on their financial situation and preferences. Credit cards offer convenience and flexibility but come with higher interest rates, while home improvement loans provide lower rates and more significant loan amounts but require collateral.

For your customers to make an informed decision, it’s a good idea to consult a financial advisor or lending expert to determine the best financing option for their needs. That’s where an experienced contractor financing lending partner steps in. Armed with an in-depth understanding of the industry, these financial institutions offer more than just capital. They provide a partnership that seeks to understand and cater to the specific needs of home improvement companies and their customers.

Partner Forward with Salal Dealer Direct

We team up with contractors nationwide to provide their customers with affordable financing for various solar and home improvement projects.

We can offer some of the most competitive rates and dealer fees because we’re part of a member-owned credit union. That means our profits return to our members—and business partners—through lower rates and fewer fees.

Our Dealer Direct Financing programs feature:

  • An online loan application with fast credit decisions and a high approval rate.
  • Terms and loan amounts are available to fit various budgets and project sizes.
  • Partners pay ZERO dealer fees on our standard program.

How to Start Offering Salal Dealer Financing to Customers

We’re serious about helping your business grow with fast funding times and personalized support from a dedicated and experienced team of lending specialists. To get started, our dealer application process requires these documents:

  • Completed dealer questionnaire
  • Current income statement and balance sheet
  • Copy of business license and/or contractor’s license



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