The Contractor’s Guide to the Most Common Home Improvement Financing Options

4-minute read | Jan 4, 2024

When it comes to funding a project, homeowners are often confronted with a variety of home improvement financing options. As a home improvement contractor, knowing about the various home improvement financing options can help you educate customers regarding the best choice for the size and scope of their project, their credit history, and their current financial situation.

Keep reading to learn more about the three most common home improvement financing options: credit cards, home equity line of credit (HELOC), and home improvement loans.

Contractor and client reviewing home project financing options

Credit Cards

Credit cards stand out as one of the most accessible avenues of financing, particularly for smaller home improvement projects. Upon approval, cardholders can instantly access their funds, which can be a significant advantage when quick financial decisions are necessary.

In addition, credit cards often come with a range of perks. Many offer rewards, cash back, or even travel benefits, and by channeling significant expenses through them, consumers can rapidly accrue these benefits. Certain cards also feature introductory offers, such as 0% interest rates for a set duration. This can be particularly beneficial for those who can settle their balances within this period.

However, credit cards have their downsides. The allure of introductory offers can fade swiftly as standard interest rates–often higher than other financing methods–take effect after the promotional period. Moreover, the borrowing limit on credit cards is generally lower, making them less viable for larger home improvement projects.

Home Equity Line of Credit

A HELOC allows homeowners to leverage the equity accumulated in their properties. This financial tool operates much like a credit card but with a significant difference: it’s secured against the borrower’s home. This inherent security results in some tangible advantages. For one, HELOCs usually offer lower interest rates when compared to standard credit cards or unsecured loans. Its flexibility is another excellent feature; homeowners can draw funds per their requirements, and the interest is only charged on the utilized amount. Using a HELOC for home improvements might also come with a tax advantage; under specific circumstances, the interest could be tax-deductible.

However, as with any financial instrument, considerations must be made. The most pressing concern is the potential risk of foreclosure. Since a HELOC is anchored to one’s home, defaulting on payments can lead to property loss. Another aspect to be wary of is the fluctuating nature of the interest rates on most HELOCs. An upward surge in rates translates to increased monthly payments. Finally, initiating a HELOC is time-consuming and might incur closing costs and associated fees, which prospective borrowers should account for in their financial planning.

Home Improvement Loans

Home Improvement Loans serve as a specialized form of personal loans explicitly designed to fund home renovation projects. A distinct feature differentiating them from HELOCs is that they aren’t secured against your property. This characteristic means homeowners don’t risk their homes as collateral.

There are several compelling benefits to these loans. Notably, they offer fixed interest rates. This setup ensures borrowers can anticipate consistent monthly payments throughout the tenure of the loan, eliminating the anxiety of fluctuating costs. Further, the application process is independent of the equity a homeowner has accumulated in their property. This flexibility means homeowners can access these funds regardless of their equity status. Additionally, these loans are often characterized by their promptness; once approved, borrowers can access the funds relatively quickly.

However, because home improvement loans are unsecured, they typically bear higher interest rates compared to HELOCs, which are secured by one’s home. Another point of caution is the borrowing limit. Depending on the lending institution and the borrower’s credit score, there might be a cap on the loan amount, potentially restricting the scope of home improvement projects.

Helping your customers choose the right home improvement financing option for their project can mean the difference between a won or lost sale. Is your home improvement company ready to minimize lost sales?

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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