If you need help paying for your renovation, your contractor might save you a trip to the bank: Forty-two percent of general contractors in our survey said they provide financing options to clients.

Some general contractors offer interest-free loans for, say, 12 to 18 months—almost always through a third-party lender. Others may offer so-called private label credit cards, such as the Wells Fargo Home Projects Visa, that can be used to pay for renovations (interest rates range from 0 to 12.9 percent). You can use the card at retailers, but interest rates go up to 28.9 percent




Contractors may also act as middlemen for loans with third parties. Interest rates at LendKey, for example, recently ranged from 6.49 to 11.99 percent, depending on your credit.

Those options are not with­out drawbacks: If you can’t pay off an interest-free loan in full before the term is up, for example, you’ll probably owe interest backdated to the day you signed the deal. With personal loans, you need to check all terms and conditions to make sure there are no unexpected fees. Make sure you don’t lose the right to withhold payments, if that was stipulated in your contract.

Disciplined borrowers might consider using a card with a zero percent introductory rate to pay for a renovation. But that approach is only for those who are sure they can pay off the balance before the introductory period ends.

Compare any deal you’re offered through a contractor with banks and credit union options, including home equity lines of credit or home equity loans (currently averaging around 4.7 and 4.5 percent, respectively, for $30,000). Compare the full cost of the loans, including rates, closing costs, origination fees, and any other charges, says Bill Simone, president of Custom Design & Construction, based in Los Angeles, and a member of the steering committee for Harvard’s Joint Center for Housing Studies. And keep in mind that when your lender is your contractor, you need to vet him in both roles. Ask past clients whether there were problems using his financing, and check to see whether there are complaints about the company’s financing deals with your state’s office of consumer affairs and the Better Business Bureau.

Editor's Note: This article also appeared in the June 2016 issue of Consumer Reports magazine.