Dear Chuck,

I need your advice. My husband thinks we should get an installment loan to update our home. Although we can do a lot of the labor ourselves, we need materials, tools, and some professional labor to get what we both want. I would rather save for a year, but he has time in his schedule and would like to start over the holidays. Which approach is best? 

Fixer Upper Fever

Dear Fixer Upper Fever, 

With the impact of the wildly popular TV program, Fixer Upper, many people are looking to make significant improvements to their home. 

I was just recently in Cape Town, South Africa hosted by a Christian couple who also have “Fixer Upper Fever”. They had several books by Chip and Joanna Gaines on their coffee table and the wife told me how she hoped to travel to Waco, Texas one day for inspiration and ideas for their home! 

Let me help you with that fever. There are good ways to fix up your home; those would be additions that add value. And there are bad ways to fix up your home; those would be additions that do not add value but cost time and money. 

But your question is not centered around what additions you want to make as much as how you plan to pay for your fixer upper dream come true: by paying cash or borrowing money. 

Fixing Up the Home Using an Installment Loan

I want to give you some insights into the ‘installment loan industry” before I give you my advice. Installment loans are borrowed funds that are repaid in equal parts over a set period of time. They are different from credit cards or revolving credit which varies monthly. In some cases, installment loans can be creatively structured to fit your time table. 

Personal loans, auto loans, and home mortgages are types of installment loans. And, there’s a rise in online installment borrowing. Many of the same subprime lenders that specialized in payday lending are now promoting online installment loans.

Americans are becoming increasingly dependent on debt. We see it in the form of unsecured personal loans, mortgages, auto, credit-card, and student debt.

After the Great Recession, many payday lenders saw the “opportunity” to meet the needs of the working class through loans that side-stepped regulations. Over a period of five years, non-prime borrowers have accumulated approximately $50 billion on installment plans. 

Those of us who studied and survived the subprime mortgage crisis hear alarms at the increase in debt among the less than prime borrowers. Payday loans are perceived to target America’s poor, but these online installment loans aim for the working-class who are struggling to keep afloat.

Granted, there are times when a loan is necessary. Emergencies hit when many are unprepared. People who can borrow from a reputable institution like a credit union get interest rates that are usually much lower.

Consider the pros and cons of installment loans: 

Pros

• Known monthly payments grant ease in budgeting
• Usually fixed interest rates for longer time than payday loans

 Cons

• May not be able to increase the loan amount once funds are received
• Some lenders charge high fees and take advantage of people with poor credit 
• Fast-cash offers often come with predatory lending practices 

Many Americans are unable to discipline themselves when it comes to credit and spending. They buy what they want, when they want, with no concern for the future. They do not realize the real needs that exist in the future and their lack of planning will be their demise.

When Jesus addressed the crowds about the cost of becoming a disciple, he gave some vivid illustrations. This was one: For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it? (Luke 14:28 ESV)

The Old Fashioned Way – Pay For it With Cash

I am very encouraged that you and your husband are considering paying for your home improvement with cash. This has many benefits that we often fail to consider: 

• The overall cost of the improvements are much lower since you are not paying interest on a loan. 
• You will be more careful with the money you are spending since it impacts your budget immediately. 
• You will sleep better at night knowing debt is not hanging over your heads. 
• You will remove the sense of urgency that you need to borrow the funds and jump right into the project. 

My Advice 

Obviously, I think you should hold off until you can pay for the project in cash. However, it is a good idea to be on the same page with your spouse. I suggest you set time aside together and ask yourselves these questions.  

• Do you plan to sell the house? If so, when do you think that will happen?  
• Is there a need for repairs/remodeling to be done now? 
• Have you discussed paying with cash as you go instead of borrowing a lump sum now? 
• Will your home appreciate in value with the changes you plan to make? Are you sure? 
• Are these necessary repairs and routine maintenance or just cosmetic changes?

Before you borrow, analyze whether you can comfortably repay it on time. Since I don’t know your complete financial picture, borrowing and starting now may have advantages to you and your family that I am unaware of. Just remember, there will be unexpected expenses in your future. 

Living in peace together in your fixer upper is the best plan.  Don’t voluntarily bring stress into your lives that could rob you of the freedom and abundant life God designed for you to enjoy no matter how convenient it might seem to start the remodel quickly. 

I’d encourage you, and any couples wanting to get on the same page about their finances, to go through the Money Dates Crown offers. You can access them for a donation of any amount or for free! You’ll also gain access to a library of other resources and courses – check it out on Crown.org now!

Originally published on the Christian Post, November 15, 2019