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How to Finance Emergency Home Repairs

Christy Bieber
By: Christy Bieber

Our Loans Expert

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As any homeowner knows, things tend to break -- and often at the worst times when there's not a lot of spare cash available for expensive repairs. In many cases, these repairs simply can't wait. After all, if you have no heat on the coldest day of the year or your water heater is flooding your basement, saving up for repairs isn't a possibility -- you need a service tech to come out right away.

If you find yourself in this situation, figuring out how to pay for emergency home repairs becomes a top priority. Unfortunately, if you make the wrong choice for how to borrow, you could end up making your home repairs much more expensive than they need to be.

To help you figure out how to finance emergency home repairs, we've put together this guide, which includes options like:

  • Taking out a personal loan
  • Putting the repairs on a credit card
  • Using a home equity loan or home equity line of credit
  • Taking out a Payday Alternative Loan
  • Paying with cash from an emergency fund or home repair fund

Taking out a personal loan

Personal loans can be an ideal way to fund repairs, especially if you have bigger fixes to make to your home. While some lenders specifically market personal loans as renovation loans, you can apply for any personal loan and don't have to restrict yourself to those options alone.

Banks, credit unions, and online lenders all offer emergency loans typically ranging from around $1,000 to $40,000 or more. How much personal loan you can get depends on a number of factors, including:


Comparing personal loan lenders

When you're ready to take out a loan, don't just pick one lender. Apply for pre-approval with at least 2-3 lenders, so you can compare fees and interest rates. Not sure where to get started? Our experts published a list of their top personal loan lenders.

The interest rate on personal loans is typically below the interest rate on credit cards. Most borrowers can qualify for an unsecured loan. That means you won't have to put your home or other property on the line as collateral to guarantee the loan.

Loans can often be funded within a week or so, with some lenders promising money as soon as the day after you apply and are approved. You'll have a set repayment timeline, which is usually a few years, so payments will be affordable, and you'll know exactly when you'll be debt free.

The below calculator can help you see whether a personal loan fits your budget. Just enter the amount you need to borrow, the interest rate you expect (14-18% is a good starting point if you're not sure), and the number of months you'll need to pay it off. If the monthly payment looks too high, try decreasing the amount you borrow or increasing the number of months to pay off the loan.

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Putting the repairs on a credit card

If the vendor you're doing business with allows you to charge repairs, this is an easy option -- especially if you put the repairs on a credit card you already have open. Charging the repairs could also allow you to earn credit card points, miles, or cash back.

The problem with using a credit card is that interest rates are typically very high. This means your home repair will be much more expensive if you don't pay off the full balance on your card when your statement comes due. If you make only the minimum payment, you could end up paying thousands of dollars in interest over many years before your repairs are paid off.

You could save on interest by using a 0% intro APR credit card. These cards have special promotions where you pay no interest for a set period of time, such as 15 months. But you'd need to apply for one of these cards, as most often the 0% promotional offer is open only to new customers. You'll want to make sure that you can pay off the balance before the promotional period is over to avoid high interest costs.

Whether you use a new or existing card, there are other risks to be aware of. If the repair is an expensive one, you could also hurt your credit score by maxing out your credit card. Or you may not have a large enough line of credit to cover the full repair cost.

Using a home equity loan or line of credit

If you have a home equity line of credit (HELOC) open, you can borrow as needed -- up to your credit limit -- so it's easy to borrow to pay for repairs. The interest rate on a HELOC is usually well below the interest rate on credit cards.

Home equity loans also have lower rates than credit cards in most cases, but you must borrow a set amount up front rather than getting a line of credit you can draw from as needed.

Tapping into the equity in your home to pay for repairs is risky because the debt is secured debt. If you don't pay off the loan, you could be foreclosed on. But with this type of loan you could potentially be eligible for a tax deduction for interest paid, which further offsets your interest expense.

One big downside is that it can take a while to apply for a home equity loan or HELOC if you don't already have one open. And you need to have sufficient equity in your home to qualify. Still, this option is worth looking into -- especially if you have an open HELOC you can draw on or if you have a costlier repair to make that you know the price up front and can fund with a home equity loan. For more information, check out our guide to home equity loan vs. HELOC

Taking out a Payday Alternative Loan

Some homeowners turn to payday loans to cover emergency repairs, but this is a very bad idea because the APR on these loans can be upwards of 400%. There's another option for credit union members who need to borrow a small amount for repairs: a payday alternative loan (PAL).

PALs are loans that allow you to borrow up to $1,000 with capped fees. They're meant to be paid off over a few months and to serve as an alternative to costly payday loans. If you have more minor repairs to make and you've been a member of a credit union for at least a month, this could be a good option for covering your repair costs.

Paying with cash from an emergency fund or home repair fund

Each of the above options requires you to get approved to borrow and will often require you to pay interest. While they are good choices if you don't have the cash available to cover repairs, the best way to pay for issues that arise with your home is to pay out of savings.

If you have an emergency fund, you can take money out to fix whatever problems crop up. However, it's a smart idea to have a dedicated savings account where you put money each month or each year to cover repair costs that inevitably arise.

Many experts recommend saving around 1% of the value of your home each year for maintenance and repairs. While you may not spend that much every year, you'll eventually face a big repair -- such as the need to finance a new roof -- and will need thousands of dollars from your fund to cover the expense.

If you have the cash available to pay for repairs, you can avoid paying interest on a loan and you won't need to apply for financing in an emergency situation. Some vendors also offer discounts if you pay for a job with cash or a check rather than charging the repairs or taking out a loan. Use our emergency fund calculator to see how much cash you should have saved.

What's the best way to pay for emergency home repairs?

As you can see, there are lots of options for how to finance home renovations that you need to make in emergency situations, including personal loans, credit cards, home equity loans or HELOCs, payday alternative loans, and your personal emergency fund. You just need to consider which type of financing makes the most sense given the credit available to you and the amount you need to borrow for your repairs.

The Ascent's best personal loans

Looking for a personal loan but don’t know where to start? Our favorites offer quick approval and rock-bottom interest rates. Check out our list to find the best loan for you.

Our Loans Expert