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When you own a home there always seems to be home improvement projects. Whether it’s a necessity like a new roof or a major renovation like a new bathroom or kitchen, home improvements can be costly.

There are a variety of loans and financing options that can help fund a home improvement project. Even if you have bad credit, there are still ways you can qualify for financing. Here are some home improvement loan options to consider even with less than perfect credit.

Home equity loan options for home improvement

Home equity loan. The equity in your home may be your best source for financing a home improvement. With a home equity loan, your home is used as collateral for the loan, which reduces the risk to the lender. Keep in mind though the higher the credit score and the more equity you have available in your home, the better your chances of getting approved for the money you need. Note that if you have poor credit, your loan’s interest rate will likely be higher.

Cash out refinance. A cash out refinance allows you to refinance your home and take out a new loan for more than you owe and receive the difference in cash which you can use for things like home improvement. Even with interest rates on the move, you may find that the interest rate on your refinance is much lower compared to a personal loan or other unsecured loan options. Depending on when you originally took out your loan, your refinance may allow you to lower your current interest rate.

Home equity line of credit (HELOC). A HELOC is a new loan and provides an open line of credit to draw money from. The amount is based on your equity, but the interest is variable, so the rate will change throughout the term of the credit line. This could increase your monthly loan payment.

Learn more about the differences between a home equity loan, cash out refinance and HELOC.

Government loan options

Government rehab loans. Depending on your situation, you may be eligible for a government-backed loan for your home improvement project even with poor credit. There are three options: an FHA, USDA or VA loan.

  • FHA home improvement loans. The Federal Housing Administration offers rehab loans that helps borrowers purchase and renovate a home at the same time. These loans are good for first-time homebuyers because they only require a minimum 3.5% down payment.
  • USDA home improvement loans. The U.S. Department of Agriculture also has two types of rehab loans for borrowers who live in eligible rural or suburban locations. The Section 504 Home Repair program helps low-income homeowners or provides grants to older adults to repair, improve or modernize their home. Section 502 Direct Loan Program helps low-income applicants purchase homes and can also be used to build, repair or renovate a home.
  • VA home improvement loans. The Department of Veterans Affairs also offers assistance to veterans through the VA rehabilitation loan. This is a VA guaranteed loan program that allows home buyers to buy a home and fund up to $35,000 in repairs. These loans have the other VA benefits such as 0 percent down and low closing costs.

Other home improvement loan options

Credit cards. Credit cards are another way to pay for home improvements if you can pay them off quickly before the interest kicks in. If you don’t have the funds, then you don’t want to run up more debt that could further hurt your credit score. A personal loan may be a better option than maxing out your credit cards.

Store financing. Is your improvement project smaller scale, or are you planning to DIY? Depending on the type of work you need to do, you may want to consider financing through a home improvement store. Some offer store credit card promotions such as 0% financing and no annual fee, but make sure you can pay off the credit card within the promotional terms. Shop around for the best deal.

When looking to do a home improvement project, make sure you have created a budget and don’t go beyond the amount you can afford to pay back within the terms of your loan or credit.

If you are looking to fund your home project and need help with financing, contact a Freedom Mortgage home loan specialist. We may be able to help you find home improvement loan options even with poor credit.

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