30% of homeowners are using credit cards to pay for renovations: Here's what to do instead

And more than 40% of them expect to take longer than six months to pay off those purchases.


For the first time in more than a year, many Americans are finally getting the chance to enjoy leisure time outside their homes. But the pandemic has still left an impact: Nearly half of U.S. homeowners are using their space differently than they were before Covid, according to a recent survey from LightStream, the online lending division of SunTrust Bank. More than two-thirds say that spending more time at home has made them eager to make upgrades.

Given that the personal savings rate skyrocketed during the pandemic, two-thirds of respondents say that if they need to finance a kitchen makeover or backyard revamp, they'll use the money they have stashed away. But 30% say they'll primarily rely on credit cards — and of that group, 40% plan to carry a balance for six months or more.

That's a really bad idea, says Ted Rossman, a senior analyst at Bankrate. "Avoid credit card debt. It's really expensive," he says. The average interest rate on credit card balances is around 16%, which means even a small balance can quickly get out of hand.

If you're determined to make changes to your home but don't have a ton of money saved up, here are some options that are better than paying with plastic.

Loans offer better interest rates than credit cards

If you're just starting your renovation, get ready for some serious sticker shock. Covid's impact on the labor market and supply chains means that renovations are costing more and taking longer than usual. The ultracompetitive homebuying market, in which many people are stuck paying top dollar for fixer-uppers, isn't helping, either.

However, there is a bright side to renovating now. Interest rates on loans, which hover closer to the base rate set by the Federal Reserve, are going to remain low for at least the remainder of this year, Fed Chair Jerome Powell said on Wednesday.

That means large loans or lines of credit will continue to carry interest rates below 3.5% — considerably less than what carrying a balance on a credit card would cost.

"Whether you're talking about a line of credit or credit card debt or consolidating something, all of those things are cheaper today," says Mike Skordeles, senior U.S. macro strategist at Truist Financial, the parent company of LightStream. And "they'll likely continue to be cheaper than they were pre-pandemic, and as we flow through the rest of the year."

That leaves aspiring renovators with a conundrum: Interest rates are lower than they were pre-pandemic, but they're likely to rise early next year as the U.S. economy continues its rebound. That's about the same amount of time that renovation prices will stay high, Skordeles says.

To decide on the right move, you'll need to do some math. Weigh the current cost of your renovations against what they would have been pre-pandemic and consider how a change in interest rates would affect what you'd owe on a loan. Depending on your situation, it may be smarter to act now or hold off for another six months or so.

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Video by Richard Washington

Smaller, DIY projects can cost less, have a big impact

Kitchens and bathroom remodels are typically the most popular, and most expensive, projects that homeowners tackle, and that trend is continuing into 2021, according to LightStream's survey. Nearly a third of homeowners plan to tackle a bathroom update this year, and nearly 40% plan on redoing their kitchens.

That makes sense, since those two spaces often get the most use in most homes, says Chicago-based designer and HGTV host Tiffany Brooks. But anyone planning to gut either space needs to be ready for a long and expensive renovation.

"In today's market, you have to be prepared to wait," Brooks previously told Grow. "Your renovation is not going to take four weeks; your renovation is going to take upwards of about four months, and then five."

Your renovation is not going to take four weeks; your renovation is going to take upwards of about four months, and then five.
Tiffany Brooks
Designer and HGTV host

If a gut renovation means spending more than you can afford, consider taking on smaller, DIY projects that will cost less and have a big impact. Even the most basic updates, like repainting cabinets, will make a big difference: "Paint goes a very, very long way," Brooks says. "Add crown molding to make your cabinetry look like it goes all the way to the ceiling. Consider changing your backsplash, or even your countertop."

Even combined, those projects would likely be a fraction of what a full kitchen overhaul would cost right now, Brooks says.

To make your hard work go even further, "think like a decorator," Brooks says. Pick trendy, neutral colors like grays and blacks that will instantly modernize your home, while having broad appeal to anyone who comes over.

Build up a renovation fund by turning your house into a source of income

If you can afford to put your renovation on hold for at least a few months, you may be able to avoid taking out a loan altogether. Consider using your house for a side hustle, earning extra income to help fund its makeover. Here are a few ways you can make your home work for you:

  • Rent out your whole property. Even as pandemic precautions wane, people are still looking for outdoor spaces to hold events. Offer your backyard as a party venue on a site like Peerspace, where spaces rent for a range of prices, from $25 per hour for a conference room in Los Angeles to $200 per hour for a game room in Denver.
  • Rent your backyard to curious pups. Got a large, grassy, and well-protected backyard? Sniffspot is an app that lets you list your space for dogs to play in. Users on the site generally charge $5-$20 per dog per hour. The site sets rules requiring dog owners to pick up after their pets and not enter the renter's home.

This story has been updated to reflect the focus of LightStream's business.

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