Why to use a RenoFi loan instead of a credit card

Credit where credit’s due: Why a RenoFi Home Renovation Loan makes more sense than credit cards to help finance your reno plans

In June 2022, the Federal Reserve increased its target federal funds rate by 0.75% - the biggest hike in nearly thirty years. If you were planning to finance your home renovation loan in whole or in part via your credit cards, this sudden adjustment may very well have thrown a wrench in your renovation plans. 

Why have interest rates spiked?

During the pandemic, interest rates were at an all time low to help keep the economy turning over. RenoFi’s circumstantial evidence shows that while lockdown was in effect with no end in sight, many of our clients began planning their home renovation and found us to help them achieve their goals.

Of course, not everyone looking for a home renovation loan has taken advantage of RenoFi’s unique lending experience, many opting for a traditional FHA 203k or Fannie Mae Homestyle Loan and others dipping into savings and “making up the rest on the cards.”

In a low-interest environment, that route might have made sense, but now the game has changed: with inflation on the rise, high-interest rates may well be the norm for the foreseeable future. The reasons for this are many and varied as the Fed outlined in a recent press release, but the key statement is: 

“The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committees’ goals.” 

In other words, the Fed is going to do whatever it takes to get inflation down and if that means further hikes in interest rates, then that’s what it’s going to do. 

Relying on your credit card to buffer your renovation is now a riskier prospect than ever since the average rate is currently 16.78% (and set to “soar” according to creditcards.com).

What makes RenoFi a better option than credit cards?

RenoFi has been offering more than competitive rates since its inception. Below is a graph showing the average loan rates paid by our clients from April 2020 through April 2022. 

The variation was between 5 and 6% for that period - so around 10% lower than the current average credit card APR. 

Sounds too good to be true? 

There is no “catch” in working with RenoFi to finance your home renovation loan. We work exclusively with credit unions who provide RenoFi Loans specifically for one purpose: home renovation. 

Our team of expert Advisors works with our clients on a case-by-case basis to ensure that we assign the credit union that can offer you the best rates, lowest fees and, crucially, the right loan amount. 

In other words, our methodology won’t allow you to end up saddled with a loan that you’re going to struggle to pay back - something that a credit card with spiking APRs can no longer guarantee. 

Your RenoFi Advisor will be with you every step of the way, from your first call to the completion of your project. They’re there to answer your questions, provide you with expert advice, ensure that your contractors are properly vetted and that your documents have their i’s dotted and their t’s crossed - an end to end service that we hope will give you peace of mind.

But what if interest rates change?

It’s true to say that RenoFi can’t guarantee a constant 5-6% rate, but we do everything to help our clients achieve the best repayment terms possible by working directly with our clients and partnering them with a lender who works for them. RenoFi also offers products that allow homeowners to keep their low first mortgage interest rates without the need to refinance.

And now we can provide our clients with a fixed rate option if that is a route they would like to explore. 

Again - your RenoFi Advisor will be able to help you reach the decision that is right for you and your individual circumstance.  Housingwire.com, a leading source for news, commentary and analysis covering the entire mortgage and real estate market, provides an independent view on RenoFi’s fixed rate offering.

In 2020, Brendan Dickinson of Canaan - a RenoFi investment partner said: “RenoFi Loans will become the best way for consumers to finance home renovations in terms of ease of use, speed and cost of capital.”

Now that was 2020 and things have changed, haven’t they? Not with a RenoFi Home Renovation Loan according to Dickinson in April 2022.

“The most compelling product companies in fintech solve two problems simultaneously,” he said. “They identify a funding gap and create or move a product online to fill it, and then use tech to transform the margin structure to drive long-term defensibility. RenoFi’s vision fits this framework exactly.”

Find out more about how a RenoFi Home Renovation Loan works, check out our FAQs which should answer your initial questions and have a play with our Loan Calculator to run some scenarios. Better yet, contact us to talk through your project, your options and how best to tackle your renovation - which we can assure you won’t involve a credit card!