When you’re considering a big home improvement project it’s a good idea to weigh your different options for how to pay for it. A loan can often ease the immediate financial burden, but it comes with a cost.

Determining whether that cost is worth the benefits is the best thing to do, and here are the factors you should consider before getting the project started.

How Much Will the Loan Really Cost You?

You should be very clear about how much your home improvement loan will really cost you over the long run. Using a home improvement loan calculator is the best way to estimate what things will look like when you have the loan in place.

Don’t just focus on what your monthly payment will be, look at what the total amount will be when it’s finally paid in full. Look at the difference between the amount you took out, and the amount you paid back. That’s how much you paid in interest for the loan.

Interest Rate Matters

Here’s where having good credit makes a big difference. Those with better credit scores will receive better interest rates in general, meaning lower payments each month and a lower amount paid overall. If you have good credit you may be able to get a little extra done on your house with the same monthly payment each month.

If your credit is less than perfect you will want to try to pay the loan off as quickly as possible so that you don’t have to pay so much in interest. You’ll save money by paying the loan off early, keeping the total project cost at a reasonable level.

How Does a Loan Compare to Paying Out-of-Pocket?

Paying for your home improvement repairs out-of-pocket can be emotionally draining. Once you discover all of the hidden expenses associated with home repairs it’s frustrating watching your hard-earned money leave your pocket in large chunks. It can be very stressful trying to balance your regular monthly expenses along with a big home improvement project.

Of course, a home improvement project can really help boost the value of your home, not to mention improve your standard of living as well. For example, if you wish to build custom sunrooms in the remaining space of your house, it can make for a wonderful place that can be used as a home office, studio, for entertaining guests, and a whole lot more. This can definitely be a worthy addition to your home. Because of the costs associated with it however, a loan makes it so you don’t have to pay these big amounts all at once, and spreads it out over a longer period of time so it’s easier on the budget. It also gives you the ability to pull the trigger on decisions that will need to be made during the repair process. If you don’t have to worry about how it will be paid you’ll have an easier time giving the green light to get it done.

What Happens If You Don’t Take Out Enough?

If you take out a home repair loan and find that you’ve spent it all before the repairs have been completed, you can either apply for an additional loan or cover the difference out-of-pocket.

That’s why it’s good to get multiple bids on the same project before deciding on who to go with so you know how much to loan in the first place. You can also loan more than you think you’ll need up front, and just not use all of it.

Have a Loan Payoff Plan

Knowing how you will pay the loan off is very important before you take out the money. If you plan on using a tax refund to pay back the loan, or you plan on selling your house in a few years and paying the loan off from the proceeds of the sale, knowing where the money will come from is a big help.

It’s all about framing the loan the right way in your mind so that it doesn’t seem like a new long-term burden.