To many people, completing a home improvement means also means taking out a home equity loan.

While that may be a good option for some homeowners, others may not want to get one of these loans, either because they do not have a lot of equity in their home or because they do not want the hassle of applying for a new loan.

But that doesn’t mean a home improvement project has to be put on hold, there are several other ways of funding a renovation project.

• Cash. As with any other major purchase, paying with cash could save you a lot of money in interest and finance charges. While the option is not always viable, carefully weigh the pros and cons of financing your project versus waiting until you have saved enough money to pay with cash.
• Credit cards. If you don’t have a major project, you may be able to charge the expenses to a major credit card or an in-store charge card. Be cautious with this option however, because unless you can pay off the balance quickly, you may be charged a lot of interests. If possible, you may want to sign up for a low interest credit card and plan to pay the balance off before the interest rate spikes.
• Title I Property Improvement Loan Programs. These loans, available from most commercial lenders is insured through the Federal Housing Association (FHA) may be a favorable option for residents who do not have a lot of equity in their home. There are be some restrictions on the type of worker covered by the loan, and there strict loan limits. Check with your local bank for more information.
• IRA loans or borrowing from life insurance. While these options sound like they are equivalent to “borrowing money from yourself” there are some very serious tax penalties to think of. Basically, these options should only be considered if all other potions have been exhausted and the work needed on your house is severe and cannot be differed until a later date.

While a home equity loan might be an option for may people looking to fund a home improvement project, it is not the only option.

By David Plowman

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If you are in debt, figuring out who to pay first can sometimes be a difficult task. Of course, you’d like to pay everyone what they’re due, but if you have less income than what you owe, you may have to let a bill or two wait for a while. Too often the decision on who to pay is based on what creditor is screaming at the loudest.

But the fact is all bills are not created equally. While failing to pay any bill will undoubtedly hold negative consequences, some consequences may be more severe than others. When deciding who to pay, prioritize your bills by ranking the penalties of not paying the bill, and take care of the ones with the most dire consequences first.

Here are some of the bills you should consider paying first:

• Rent or Mortgage. Miss some of your housing payments, and you could be thrown out of your home. While failing to pay your credit card will put a ding on your card that may later make it more difficult for you to get a low mortgage rate or a favorable background check on rental application; paying to keep a roof over your head in the here-and-now is more important. Beside, a foreclosure or evection will put a larger ding on your credit report than being late on credit cards will.
• Child Support. Miss a few of these payments and the only house you’ll be living in is the big house. If you are destitute and truly can’t make your payment, go before the judge. Only the court can grant you a reprieve from your child support payments.
• Utility Bills. A house isn’t very useful without electricity, gas or a phone. But in this day-and-age, remember that you need only one phone, having both a cell phone and a home phone is a convenience, not a necessity. Consider canceling one of the two. Since many cell phone providers carry contracts with hefty cancellation fees, it may be less costly to cancel your home phone.
• Taxes. One of life’s two certainties, the taxman doesn’t take a break when you’re down on your luck. Failure to pay could result in garnished wages. If you can’t pay, contact a friendly IRS agent and ask to work out a payment arrangement.

Next, there are several other bills which may or may not be considered essential, depending on your situation:

• Car Payments. You may need to keep your car to commute to your job (or to interview for a job). But if you live in an area that has a good public transportation system, you may want to consider selling your car to pay off your car loan or other essential bills. Or, volunteer to give your car back to the lender to avoid repossession.
• Car insurance. Many states require you to have general liability coverage to drive. However, you may want to consider eliminating other forms of coverage that are not required by law such as collision coverage.
• Other secured loans. If you have any other loans you had to put down collateral for, remember it could be repossessed without a court order, depending in what state you live in. Consider how important the item you put up for collateral is to you and whether or not you would need it after it is taken from you. Keep in mind that just like many other financial obligations, missing payments or defaulting on this loan will result in another negative ding on your credit report.
• Health insurance or doctors bills. It is a sad and fact that if you are in between jobs or are working at a company that doesn’t provide health insurance, your insurance costs will be hefty. Still, if you are currently receiving medical care, or need the assurance of knowing you’ll be covered if a sudden medical emergency arises, it may be worthwhile to keep your coverage. Consider insurance with a high deductible, which is basically designed to offer coverage if you need emergency care in a hospital. It probably won’t cover routine doctor’s visits, but your premiums may be more affordable.

While the remaining bills are important and may have many negative consequences if you fail to pay them, they are not essential. Attempt to pay them only after you have budgeted for the essentials above, as well basic necessities such as food and clothing:

• Credit cards. Miss a few payments and you’ve you’re likely to see negative marks on your credit rating. You’ll also likely be facing calls from collection agencies, increased late fees and high interest charges, and maybe even potential lawsuits as creditors try to collect their money. While there is no denying these situations are extremely stressful, paying these bills should never be your top priority.
• Debts to friends or family. You may have a (justified) moral responsibility to pay off personal debts, but there are generally few financial repercussions on being late on a payment to your cousin Larry. If you tell Larry you will have to be late paying him because you have to make a mortgage payment, he’ll likely understand. But your mortgage company is likely to be much less forgiving if you tell them you didn’t make a payment because you had to pay Larry.
• Bills for legal or accounting services. While you probably should expect good financial advice from an accountant you owe money to, paying for their services is not a matter of life and death. While it may not be a stretch imagine that a lawyer you owe money to might sue you, bills for your housing are still more pressing.

Being in debt can be maddening and frustrating thing. But don’t let the frustration force you to make poor money choices by paying for non-essential bill before you’ve taken care of the necessities.

David Plowman

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