Renovating a 2,000 square foot home costs an average of $40,000; while the average kitchen remodel alone costs about $45,000. If you can’t afford to pay out of pocket for the improvements your home needs, consider a home improvement loan.
Home improvement loans include home equity loans and lines of credit, personal loans, and credit card financing. Each works differently. We focus on unsecured personal loans so you can finance home improvements even if you don’t have much equity, or can’t wait 30 plus days for the loan to close. With a personal loan, you can get funding in days and don’t have to use your home as collateral.
There is no shortage of home improvement loans available. To find the right one, start by examining your needs. How much will your home improvement project cost? Then, add at least 10% as a buffer for unanticipated expenses. You can eliminate any lenders that don’t offer the loan amount you need.
Next, pay attention to each lender’s eligibility requirements, like FICO score and income. Some lenders are more transparent than others about these requirements, but many will let you prequalify online with a soft credit check (it won’t hurt your credit score). Once you’ve found lenders that meet your criteria, and vice versa, compare available loan terms (how long you have to pay back the loan), plus rates, fees, funding times, and discounts. The annual percentage rate (APR) is the number to use when comparing loan costs.
We evaluated the best personal loans for home improvement based on factors such as customer experience, minimum fixed rate, maximum loan amount, funding time, loan terms, fees, discounts, and whether cosigners are accepted. Our team of experts gathered information from each lender’s website, customer service department, directly from our partners, and via email support. Each data point was verified by a third party to make sure it was accurate and up to date.
Read our full lender rating methodology for more information.
A home improvement loans is simply any type of loan you can use to pay for home improvements. The most common are home equity loans, home equity lines of credit (HELOCs), personal loans, credit cards, and certain FHA loans. Which is best for you depends largely on the type of improvements you want to make, how much they’ll cost, how soon you need the money, and what you can qualify for.
Note that most home improvement loans are not tax deductible. However, if you use a home equity loan to “substantially improve” your residence, you may be able to claim the interest as a deduction on your taxes. Talk to a tax professional before claiming home improvement loan interest as a deduction.
Best if: You don’t have sufficient equity to qualify for a home equity loan or need emergency home improvements.
Personal loans are unsecured loans that typically have a fixed interest rate. If you take one out, you’ll receive a lump sum of money upfront and repay it over time through monthly payments. In most cases, personal loans range from several hundred dollars to over $100,000, with terms of one to over 12 years, depending on the lender. The amount you get approved for and the cost of the loan will depend on factors like your income and credit score.
Personal loan interest rates range from around 7% to 36%, with the average personal loan interest rate at 12.49% for a two-year loan, according to the Federal Reserve. Try Lightstream or BHG Money if you need a relatively large loan and a repayment term of 10 to 12 years.
Learn more: What is a personal loan?
Best if: You have home equity that’s sufficient to fund your project, are willing to use your home as collateral, and don’t need the money immediately.
Also known as second mortgages, home equity loans are based on the equity in your home, which is its market value minus what you owe on your mortgage. Most lenders require that you have at least 20% available equity in your home. Upon approval for a home equity loan, you’ll receive a set amount of money that you’ll repay via fixed monthly payments over a term up to 30 years. If you default on your loan, the lender may be able to foreclose on your home.
Interest rates tend to be lower on secured loans, but you could pay upwards of 2% in closing costs, and the closing process may take a month or more.
Best if: You don’t need all the money upfront and have sufficient equity to qualify.
A home equity line of credit, or HELOC, is similar to a home equity loan in that it is also secured by the equity in your home. You’ll often need at least 20% available equity to qualify. With a home equity loan, however, you receive a line of credit. During the draw period, which could last five to 15 years, you can access the credit line and will only owe interest on the amount you use. However, once the draw period ends, you’ll enter the repayment period. During this time, you’ll no longer have access to a credit line and will need to fully pay off the balance over a period up to 20 years.
Closing costs can be upwards of 2% of the loan amount, and a HELOC can take 30 days or more to close.
Best if: You can get a lower rate than what you currently have, and you have sufficient equity.
A cash-out refinance, or cash-out refi, is similar to a home equity loan and a HELOC — except that you replace your current mortgage with a new, larger one. You then receive the difference as cash to use as you please, like for home improvement costs. Most lenders allow you to borrow no more than 80% of your home’s equity.
Cash-out refis usually make sense when interest rates have come down since you took out the original mortgage, or if your credit has improved such that you can qualify for a lower rate.
Best if: You have a 0% APR purchase offer and can pay back the balance within the promotional period.
Credit cards are best used for modest home improvement projects that can be paid off within a short period of time, even if you have a low promotional APR. This is because once the promotional period ends, your card’s rate will adjust to the standard rate. Promotional periods often last between nine and 21 months. If you can’t pay off your project within the promotional window, consider another funding option.
Best if: You have available cash that isn’t part of your emergency fund or retirement account.
The most affordable way to fund a home improvement is with cash you already have on hand. But this option could require months or even years of saving. If you can wait to begin your project, you could save hundreds or even thousands of dollars on interest and fees.
Best: If you need minor or major repairs that qualify and don’t have good credit.
The Federal Housing Administration (FHA) through the U.S. Department of Housing and Urban Development (HUD) offers a few different loan types depending on the extent and nature of renovations.
Title 1 loans are designed for home renovation projects that “substantially protect or improve the basic livability or utility of the property.” The requirements for these loans depend on the state and municipality you live in, but you aren’t generally required to have 80% equity in your home or a good credit score. Loan amounts. are limited to $25,000 for a single family residence. Visit HUD’s lender list to find lenders offering FHA Title 1 loans in your area.
If you need to fund larger renovations or don’t qualify for a Title 1, you may be eligible for a 203(k) mortgage. There are two versions of the 203(k) mortgage — limited and standard. The limited 203(k) is suitable for less expensive repairs, up to$35,000. The standard 203(k) is designed for major home rehabilitation and repairs, and is often used to purchase fixer-uppers.
Loans for home improvement purposes can be secured or unsecured. Here’s a brief overview of each option.
- Secured loans: Secured loans are backed by collateral, such as your house. Compared to unsecured loans, they’re easier to get. But if you default on a secured loan, the lender can seize your collateral. Home equity loans, HELOCs, and cash-out refi are all types of secured loans.
- Unsecured loans: Unsecured loans, like personal loans and credit cards, don’t involve collateral. However, they’re more difficult to qualify for since lenders look for good credit and stable income. The benefit of an unsecured loan is that you don’t put your house or another asset on the line if you fail to make payments.
Follow these steps to get a home improvement loan:
- Check your credit: Visit AnnualCreditReport.com for copies of your credit report from each credit bureau. If you find errors or inaccuracies, dispute them with the right bureau.
- Shop around: Once you’ve found lenders offering the loan amount you need, get prequalified with each for an estimate of your rate and terms. Prequalifying doesn’t impact your credit and lets you compare interest rates, terms, funding times, and fees.
- Apply: Once you find the right home improvement loan, fill out an application. Be prepared to share personal details and submit documents like your ID and pay stubs.
- Receive funds: If approved, review the terms of the loan and sign the loan agreement if they’re acceptable. Then, the lender will send funds to your bank account, typically within 1 to 7 business days.
Each lender has its own qualification criteria. But most of them look for the following:
- Strong credit: The higher your credit score, the lower your rate and the better your chance of approval. But if you don’t have the best credit, you may still be approved at a higher rate.
- Proof of identity and income: Lenders will usually ask you to submit an ID like your passport or driver’s license as well as pay stubs or tax forms. These help them verify who you are and that you can pay back the loan.
- Low debt-to-income ratio: Your debt-to-income ratio, or DTI, equals your monthly debt payments divided by your gross monthly income. It indicates your ability to repay your loan. The lower your DTI, the better.
It’s possible to get a home improvement loan with bad credit. But you’ll have fewer options at your disposal and will likely have to settle for a higher interest rate that can increase your loan cost. Focus on lenders that offer home improvement loans for bad credit — such as Avant and Universal Credit. And, if possible, take steps to improve your credit before you apply.
If you have bad credit, you may have more luck with a secured personal loan, like a home equity loan or HELOC. But you risk losing your house if you default on the loan.
A home improvement loan is an unsecured personal loan you can use to pay for a home improvement project. It can help you cover a kitchen remodel, new roof, landscaping, or any other home improvement. Unlike a secured loan, collateral (such as your home) is not required for a home improvement loan.
With a home improvement loan, you borrow a lump sum of money that you repay with interest via fixed installments over a set period of time. Repayment terms can last up to 12 years, depending on the lender. Home improvement loans are offered by banks, credit unions, and online lenders.
Home improvement loan amounts vary by lender. But typically, you can borrow anywhere from $1,000 to over $100,000, depending on what you qualify for and what the lender offers. Factors like your credit, income, and existing debt determine the amount you’re approved for.
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