Majority of Consumers Willing to Increase Debt for Home Improvements

69% of homeowners plan to renovate in next 5 years
Bathroom renovation plans

If a man’s home is his castle, it makes sense he’d want to enhance his surroundings with home improvements. But a new survey suggests that many consumers would compromise their financial health in the process.

Not all home improvements are necessities. For example, upgrading the cabinets or replacing the floor may be aesthetically pleasing but unnecessary. Yet many consumers who are already in debt would secure more debt in order to have such enhancements made, according to a survey by financial solutions provider Freedom Debt Relief. To gain insights into how consumers would pay for renovations, polling company Atomik Research surveyed 1,028 U.S. homeowners with at least $10,000 in unsecured debt.

For the majority of respondents, debt is not much of a deterrent for more spending. Approximately 69% of respondents said they had plans to renovate in the next five years, though 60% admitted they couldn’t afford such improvements. Rather than paying for some or all of the improvements with cash, most respondents ⁠— 73% ⁠— said they planned to finance the entire amount.

  • 40% said they would use a home equity loan (HEL)
  • 38% said they would pay for improvements with a credit card
  • 32% said they would take out a personal loan
  • 26% said they would pay for the work on their home with a home equity line of credit (HELOC)

The amount of additional debt consumers are willing to take on is substantial, with 26% of respondents expecting to spend more than $25,000 on renovations in the next five years and 25% planning to spend between $5,001 and $10,000. The most popular renovations planned were flooring renovations (56%), bathroom renovations (53%) and kitchen renovations (51%).

Age may play a role in how consumers pay for renovations. Gen Zers, those between 18-22, were most likely to use a credit card, with 40% planning to pay that way. They were followed by 36% of millennials (those between 23-38), 23% of baby boomers (those between 55-73) and 21% of Gen Xers (those between 39-54) who plan to use a credit card. The eldest Americans are more partial to personal loans with 33% of the Silent Generation (74 and up) looking to finance improvements that way, followed by 31% of millennials, 20% of Gen Xers, 13% of baby boomers and 10% of Gen Zers.

Gen Zers were also the most bullish about improvements, with 91% planning to renovate in the next five years followed by 78% of millennials, 69% of Gen Xers and 53% of baby boomers.

If you’re set on making home improvements, consider doing the renovations that will add the most value to your house. That way if you decide to sell, you may recoup part or all of your investment. If you’re planning to finance the improvements, consider which type of loan will cost you the least over the long term. For example, HELOCs and HELs tend to have lower interest rates than credit cards or personal loans, but there is more risk since with home equity products, your house serves as collateral

Tamara E. Holmes

Tamara E. Holmes is a Washington, DC-based writer who covers personal finance, entrepreneurship and careers.

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