If you have the money available and don't want to worry about future debt, using cash from your savings or liquidated investments is probably the best way to finance a home-remodeling project.

However, if you can't spare the cash and must remodel now, select your financing based on the type and size of project you're planning, how much you'll need to borrow and over what span of time. Here are some popular options:

Home-equity line of credit. A HELOC is best if you think you'll have multiple projects or needs over several years. You're offered a credit line and an interest rate based on the value of your home, liabilities and credit score. As with a credit card, you borrow only what you need — generally for up to 10 years — making interest and principal payments when you start a balance.

The interest rate on a HELOC floats based on the prime rate plus or minus some percentage points. (In early June, it averaged 8.01 percent for a credit limit of $30,000.) Interest payments on debt up to $100,000 are tax deductible. Because today's lending market is so competitive, HELOCs generally have few — if any — administrative fees.

Home-equity loan. This is best for a short-term project, and for people who can't stomach the interest-rate changes inherent in home-equity lines of credit. With the past year's fast-rising prime, this type of financing has gained ground against HELOCs. Like the HELOC, this loan is secured by your home's equity. The rate — and the amount you borrow — is fixed.

For example, the average rate in early June for a $30,000 loan was 7.75 percent. You may be asked to pay closing costs such as recording fees, appraisals, origination fees and discount points, which can add as much as $1,000.

Credit card. This is a reasonable choice when your project will cost just hundreds or thousands of dollars and you expect to pay back the money in a few months. With fixed-rate interest rates on platinum cards averaging about 10 percent — the average is 13 percent on standard cards — this is costly for the long term.

401(k) loan. Your employer might let you borrow from your 401(k). In this scenario, the interest you pay goes back to you, not to a third party. But there are potential downsides: You could be stunting your retirement savings, and you will have to pay off any balance if you leave the job.

More options

Other financing options include project loans now being offered by home-center giants Lowe's and The Home Depot.

Lowe's Project Card gives customers a six-month window in which to make all project purchases, but the first purchase must total $1,000 or more. The advantage with the Lowe's card is that all the payments you make during that period will be interest-free. Once the window closes, you cannot make more purchases, and you must begin paying off the card at a fixed rate ranging from 8 to 18 percent. (The company provides one 25-day grace period.)

Home Depot's Home Improvement Loan offers nearly identical terms, but with a couple of administrative twists. Home Depot does not provide a grace period after its six-month window closes. And, unlike Lowe's, Home Depot will not let you open additional project loans without reapplying, although it will provide a credit card for additional purchases. (The two stores' regular credit cards are also nearly identical, with annual interest rates as high as 21 percent.)

Yet another way to fund a remodeling project is through cash-out refinancing. With this option, you take out a whole new first mortgage that's bigger than the original, using the equity buildup in your home for the renovation. This is ideal for costly projects, but it's most advantageous when housing prices are rising and interest rates are dropping. In other words: Not now.