Renovating and Maintaining

4 Must-Know Home Improvement Financing Terms

Secured vs. Unsecured and Loan vs. Line – Do you know the difference?

couple sitting on back deck looking at computer

People considering home improvement financing tend to have many of the same questions when they get started, like... Should I use the equity in my home? How much can I borrow? How quickly do I need the funds?

There are many financing options available, and not all home improvement projects are the same. So, make sure you understand some important terms before you determine which financing option is best for you. Here's a quick overview:

Loans vs. Lines of Credit

  • A loan is a lump sum of money that you borrow all at once and repay over a fixed period of time. 
  • A line of credit is a revolving account that allows you to access the amount you need, when you need it, and repay and continue to access available funds over a set period of time. 

What does it mean for home improvements? 

  • A loan may be best for large, one-time investments/projects where you know the scope and costs of the work upfront, and where contractors may require payment in full all at once.
  • A line of credit may be best for projects where you need to be flexible, since it allows you to borrow what you need for your project, but still provides you with ongoing access to additional funds up to the full line amount.

Secured vs. Unsecured 

  • Secured means that the loan or line of credit is supported by an asset (or collateral), such as your home or an investment account. Secured represents a higher risk for the borrower, as a lender may seize the collateral if the borrower does not make the payments. 
  • Unsecured means that the loan or line is not supported by an asset. This represents a higher risk for the lender, as there is no collateral if the borrower does not make the payments.

What does it mean for home improvements? 

  • Secured loans or lines may be more ideal for larger home improvements since they generally have lower interest rates and higher loan amounts/line limits.
  • Unsecured loans or lines may make sense for smaller or unexpected projects. Especially since the time from application to funding can be less than one week.


  • A mortgage is a loan that is secured (by your house).
  • A credit card is a line of credit that is unsecured
  • A personal loan is a loan that can be either secured or unsecured.
  • A Home Equity Line of Credit (or HELOC) is a line of credit that is secured (by your house).

Now that you’ve got the terms figured out, it’s important to understand what financing options are out there. You can evaluate each one to find the best solution for your specific situation and home improvement project.

You’ve got plans, we can help.

Find the home improvement financing that’s right for your situation.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.