The cost of home renovation projects can quickly spiral out of control.
You rip up the carpet only to find the floors need to be repaired as well. You tear down a wall to open up a room, but now you’ve come to find it was a load-bearing wall. You pulled up the tile in your bathroom only to find dangerous mold that needs to be removed.
It’s times like these that your original budget might stretch well over what you can afford. One option is the Home Depot Project Loan. Is this a worthwhile option for homeowners to finance their renovations?
The Home Depot Project Loan is for homeowners needing a bit of extra cash to cover the full scope of home renovations. Contractors can’t apply; it’s only for folks who are undertaking the project on their own homes.
Here is what you need to know about the Home Depot-branded loan.
Home Depot Project Loan Breakdown
The Home Depot Project Loan is more restrictive than a personal loan issued through a bank. It operates, in a sense, like a preloaded credit card, which can then be used to make purchases at Home Depot stores and their website. You cannot use the card at any other locations.
- 6 Month Buying Window
- Interest-Only Payments
- 84 Months of Repayments
- Loans between $2,500 and $55,000
- 7.99% APR
- Purchases Restricted to Home Depot
- No Annual Fees
When compared to other personal loans offered by banks, lenders and credit unions, which can also help cover the costs associated with renovations, the Home Depot loan is quite restrictive and comparatively more expensive.
You’ll only be able to purchase goods and services from Home Depot itself, whereas with other personal loans, you’ll be able to make purchases anywhere and use the funds as you see fit. In addition, interest rates on other personal loans start as low as 4.99% – significantly lower than what Home Depot offers.
Alternatives to Home Depot Project Loan
Benefits of the Home Depot Loan
If you’ve already attempted to secure a loan through another avenue, the Home Depot Loan might make a good alternative, provided the terms and interest rate make sense for your situation. The credit is helpful for those who expect to have the financing to pay off the loan much faster than the full 84-month term.
It’s also a helpful tool if you know you’ll be making all your project purchases at Home Depot. It makes the transactions quick and easy, and there is no need to transfer money from one account to another, the cash is all available through the loan credit card.
Downsides of the Home Depot Loan
The downsides of a Home Depot Project Loan are apparent. Its financial products come with a relatively high interest rate and inflexible terms. For their largest loan of $55,000, if you take the entire 84 months to pay it off, you’ll be paying nearly $17,000 in interest.
While there are no penalties for making early payments, you aren’t able to extend the repayment term beyond the 84 months. If you aren’t able to wrap it up, there are penalties for going outside the original terms.
Depending on your credit score, you might be able to find lower interest rates with other lenders. Lines of credit or secured loans also tend to have lower interest rates, provided your credit is good to excellent.
>> Read More: Personal Line of Credit vs. Personal Loan
Finally, you are only allowed to access the money within the first six months. After which, you’ll have to use your own funds to make any project purchases. You’ll have to ensure to plan accordingly to cover all project needs in this short timeframe. And don’t forget all these purchases can only be made at Home Depot.
Is the Home Depot Project Loan worth it? In some cases, it could span the gap in financing for a few months until it is payed off. But if you expect to take the full 84 months to pay it off, it may not make the best choice for your specific financial situation.
Explore personal loans, or home improvement loan options provided by your current bank or credit union, as they will likely offer more flexibility and better terms.
Author: Jeff Gitlen
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