Home improvement is an inevitable part of being a homeowner. There will come a time where some parts of the house will need to be remodeled and renovated whether it is for design or maintenance or both. One such area is the bathroom.

A bathroom has complicated plumbing and design requirements; which is why its remodeling takes quite some time, effort and money. The average cost of remodeling a bathroom can be between $6,000 to $25,000. All this is based upon the number of changes you are making, the size of the bathroom, the labor cost, as well as the scale of the bathroom remodel itself. While a basic repair and paint job will be on the lower end of the range, extensive projects will fall on the higher end of the scale.

Generally speaking, most families tend to plan their remodel in advance in order to prepare an adequate budget and/or make other arrangements. But there are times when the chipping paint, broken cabinet doors or cracked floors force you to take the plunge right away.

But the thing is: whether a bathroom renovation is planned or unplanned, it is safe to say you need quite some money to do it; and this kind of money is not always easily dispensable for everyday Americans. How do you finance a bathroom remodeling then?

Related: 10 Ways to Save Money in Bathroom

Financing Your Bathroom Remodel

When it comes to financing your bathroom, loans are the easiest way to go about. Although there are some remodel companies that help you with it or offer special financing options, they are not easy to come by. There are two types of loans available for financing a home remodeling project:

Loan Option 1: Unsecured

Unsecured loans are the ones given by a lender without any security. This means that while obtaining an unsecured loan, you do not need to provide any collateral. Unsecured loans are usually dependent on your personal credit history which is used to determine the interest rate.

The two main types of unsecured loans are:

  • Credit Cards

Albeit not a “loan” in the traditional sense of the term because of lack of an intermediary — credit cards can be used for small payments nonetheless. Using your credit card to finance a bathroom remodel can be a good idea, specifically for low-budget remodels. We don’t recommend using them for a larger project unless you know for sure you can pay the money back on time. The result of not paying the credit card bill on time would mean that you’ll be stuck with a very high interest. If you still need to use them anyway, use them only for certain parts of the remodel and not the entire remodeling project.

  • Personal Loans

There is a reason why personal loans are so popular. They are not only easy to get, but also easy to pay off. Unlike secured loans, one does not have to jump through multiple hoops and pay additional costs just to acquire a loan. Most lenders provide the money fairly quickly; which is very helpful for a bathroom remodel. The only ‘drawback’ is the interest rate — which is completely dependent on you. The higher your credit score, lower your interest rate. Since this is an unsecured loan, your house is not at risk but your credit score will be affected if you fail to pay it back.

Loan Option 2: Secured 

Secured loans, unlike unsecured loans, are given out by lenders such as the banks, in exchange for a security (which is commonly known as collateral). When it comes to home improvement projects like bathroom remodeling, the collateral is your house. Banks and lenders decide the amount and the interest rates based on the value of the collateral and your credit history.

The major benefits of getting a secured loan are:  Lower interests, longer repayment periods and many different plans when it comes to the type of loans. However, since you will be putting up your home as collateral, in the case of your inability to pay back the loan, banks will foreclose on your property. We recommend choosing a plan that is suitable for your family and won’t be too much of a financial risk. 

Here are some ways to obtain secured loans:

  • Mortgage Refinancing

Refinancing your mortgage is not only a great way to finance your bathroom remodel, but also to lower your interest rate and monthly payments on your existing mortgage. When refinancing, the lender uses the value of your home to determine your borrowing limit. Whatever amount is left after paying off your initial mortgage can be cashed out for remodeling.

Refinancing also allows you to convert a variable interest rate to a fixed interest rate, get a lower interest rate, and reduce your overall monthly payments — all while also allowing you to treat yourself to a shiny new bathroom.

  •  Home Equity Loan

Home Equity Loan or HEL is essentially getting a second loan based on the value of your house. The lender pays you the money you require, and you are approved for a repayment period that can range from 10 to 30 years. This is a great option for those who want the comfort of paying the loan back over an extensive period of time and can manage two monthly payments without risking defaulting on them.

  • Home Equity Line of Credit

Home Equity Line of Credit, or popularly known as HELOC, is the process of obtaining a loan by leveraging your home equity. The average equity that qualifies for HELOC is around 15% to 20%. This means that you need to have paid off at least 15% to 20% of your mortgage. Based on the equity and market value, the loan amount is approved by the lender.

Since HELOC is a revolving line of credit, you are free to withdraw as much as you wish of your approved amount in the “draw” period. This amount can be used in other home remodeling projects as well and can be a great resource for unforeseen expenses. While withdrawing, you must make sure that you can afford to pay it back with interest. Be mindful that since the collateral is your home, not paying back on time puts you at a great financial risk despite the flexibility.

Making the Final Decision

There are certain factors that have to be considered before taking a secured or unsecured loan. These include the loan amount, the interest rate, the repayment period and also your credit rating. All of these factors, in one way or another, affect your decision of financing your bathroom renovation.

Remodeling your bathroom is a great way of improving your daily life as well as the value of your house — but it must only be done after taking all these factors into consideration and figuring out what works best for you based on your current and future financial situation.