BEST OF
Best Home Improvement Loans With Bad Credit
You have choices for a home improvement loan if you have a bad credit score. Online lenders, credit unions and FHA lenders may provide options.
It may be more difficult to get a home improvement loan with a bad credit score (629 or lower FICO), but you still have options. In addition to online lenders, you can consider a loan from a credit union or a government-backed loan, which may have looser borrower requirements.
Some online lenders that offer personal loans for home improvement look beyond your credit score when they review your loan application, while others tailor their product specifically to bad-credit borrowers.
Bad-credit borrowers who qualify will likely get a higher interest rate than those with good or excellent credit, so it pays to carefully compare all your options.
It may be more difficult to get a home improvement loan with a bad credit score (629 or lower FICO), but you still have options. In addition to online lenders, you can consider a loan from a credit union or a government-backed loan, which may have looser borrower requirements.
Some online lenders that offer personal loans for home improvement look beyond your credit score when they review your loan application, while others tailor their product specifically to bad-credit borrowers.
Bad-credit borrowers who qualify will likely get a higher interest rate than those with good or excellent credit, so it pays to carefully compare all your options.
Summary of Best Home Improvement Loans With Bad Credit
Lender | NerdWallet Rating | Est. APR | Min. Credit Score | Learn More |
---|---|---|---|---|
Best for Co-signed Loans | 6.94 - 35.97% | 580 | on Upgrade's website | |
Best for Low credit scores | 9.95 - 35.99% | 550 | on Avant's website | |
Best for Secured loans | 18.00 - 35.99% | None | on OneMain Financial's website | |
Best for Limited credit history | 8.94 - 35.99% | 580 | on Upstart's website | |
Best for Improving credit through the loan | 8.05 - 35.89% | 600 | on LendingClub's website |
Our pick for
Co-signed Loans
on Upgrade's website
Upgrade
Min. Credit Score
Est. APR
Loan Amount
on Upgrade's website
Our pick for
Low credit scores
on Avant's website
Avant
Min. Credit Score
Est. APR
Loan Amount
on Avant's website
Our pick for
Secured loans
on OneMain Financial's website
OneMain Financial
Min. Credit Score
Est. APR
Loan Amount
on OneMain Financial's website
Our pick for
Limited credit history
on Upstart's website
Upstart
Min. Credit Score
Est. APR
Loan Amount
on Upstart's website
Our pick for
Improving credit through the loan
on LendingClub's website
LendingClub
Min. Credit Score
Est. APR
Loan Amount
on LendingClub's website
Should you get a home improvement loan with bad credit?
A personal loan for home improvements could be a good option if you don’t want to tap home equity or max out your credit cards on the project.
Just be prepared for high interest rates if you have bad credit. Lenders look at credit scores as a primary factor in deciding whether you qualify and what rate you get. Bad-credit borrowers who qualify typically pay the highest annual percentage rates lenders offer, which can be 30% or higher.
Beyond rates, consider other features of home improvement loans to help you decide if they’re the right way to finance your project.
Fast funding. Lenders can often fund a loan in less than a week, and some say they can get you the funds the day you apply.
Fixed payments. Unlike a credit card or line of credit, the funds from a personal loan are distributed in a lump sum, so you won’t be tempted to spend beyond your project’s budget, and you make fixed monthly payments.
Short terms. Compared with home equity loans, personal loans have short repayment terms — typically two to seven years — which also means they have higher monthly payments.
Unsecured. Most personal loans are unsecured, meaning they don't require you to pledge collateral. Home equity financing, on the other hand, is secured by your home.
» MORE: Personal loans for bad credit
How to qualify for a bad-credit home improvement loan
Your credit score is a major factor in deciding whether you get a personal loan, but there are a few things you can do to help your application stand out.
Build your credit to qualify
If your home improvement project isn’t urgent, it may be better to take time to build your credit so you can qualify for a lower rate and a higher loan amount. Here are some tips to build credit before you get a home improvement loan.
Check your credit report for errors. You can get a free copy of your credit report from annualcreditreport.com and see what a lender will see when reviewing your file. Address errors or outstanding delinquencies before you apply.
Stay on top of payments. Your payment history is the biggest factor influencing your credit score. On-time bill payments can help you build credit. Set up autopay or payment reminders for all your accounts.
Pay down existing debts to lower your debt-to-income ratio. Most lenders want to see that you have enough cash each month to cover existing expenses, plus the extra loan payment.
Stay under your credit limit. Avoid heavy spending on your credit cards before submitting a home improvement loan application. Using less of your available credit lowers your credit utilization rate, which can positively impact your credit.
Add a co-signer or collateral to your application
Adding a co-signer or co-borrower with good or excellent credit can help you qualify or get a lower rate. Keep in mind that a co-signer would be on the hook for any payments you can’t make.
Some banks and credit unions offer secured loans, which require you to pledge something you own as collateral, typically a car or savings account. The lender can take your property if you don't repay the loan.
Home improvement loan alternatives for bad-credit borrowers
Home improvement loans from credit unions
Credit unions, which are not-for-profit financial institutions, typically have lower qualification requirements and rates for borrowers with bad credit. You must first become a member of a credit union, which typically involves a small fee and an initial deposit.
» MORE: Learn about credit union loans
First Tech offers a personal loan and line of credit that can be used to finance home improvements. Its personal loans carry loan terms of up to seven years.
PenFed’s personal loans can have repayment terms as long as five years. The lender lets applicants add a co-signer, which can help you qualify for a lower rate.
Government-insured loans for home improvements
Home improvement loans insured by the Federal Housing Administration are similar to conventional mortgages but have looser qualification requirements. FHA lenders typically require a minimum credit score of 500 to qualify for any FHA-insured loan.
Rates vary by lender but are often lower than personal loans for funding home improvement projects.
FHA 203(k) renovation loan: With a 203(k) loan, you refinance your existing mortgage and roll home improvement costs into the new mortgage. In addition to meeting a lender’s credit requirements, borrowers must have no foreclosures within the past three years.
The 203(k) loan process can be time-consuming. You must work with a mortgage lender to pre-qualify, a general contractor to create a scope of repairs and a HUD consultant to complete an inspection.
FHA Title I loan: The requirement to get this type of loan is pretty broad. According to the HUD website, this loan can be used for home improvements that “substantially protect or improve the basic livability or utility of the property.”
Title I loans under $7,500 are unsecured, while larger loans must be secured by a mortgage or deed of trust on the property, according to HUD.
Family loans
If you don’t qualify for another type of loan but urgently need cash, it may be worth asking a friend or relative to lend you the money. These loans don’t require good credit and they allow you and your friend or relative to decide on repayment terms and any interest.
With this type of loan, your relationship with the lender is collateral, and if you’re not careful, it could cause conflict. Learn the do’s and don’ts before diving in with a family loan.
Last updated on October 19, 2020
Methodology
NerdWallet's ratings for personal loans award points to lenders that offer consumer-friendly features, including soft credit checks, no fees, transparency of loan rates and terms, flexible payment options, accessible customer service, reporting of payments to credit bureaus and financial education. We also consider the number of complaints filed with agencies like the Consumer Financial Protection Bureau. This methodology applies only to lenders that cap interest rates at 36%, the maximum rate financial experts and consumer advocates agree is the acceptable limit for a loan to be affordable. NerdWallet does not receive compensation of any sort for our reviews.
To recap our selections...
NerdWallet's Best Home Improvement Loans With Bad Credit
- Upgrade: Best for Co-signed Loans
- Avant: Best for Low credit scores
- OneMain Financial : Best for Secured loans
- Upstart: Best for Limited credit history
- LendingClub: Best for Improving credit through the loan
Frequently asked questions
Some lenders say they’ll accept a credit score as low as 580, but higher is better. Even lenders that tailor their loans to bad-credit borrowers may seek a FICO score of 600 or higher. Find out what credit score you need to get a personal loan.
If you have bad credit, you may still qualify for a home improvement loan. You can improve your chances of getting a good rate by cleaning up your credit report, adding a co-signer and pre-qualifying with multiple lenders. Learn more about how to get a loan with bad credit.
Home improvement loans may be a good idea when used toward renovations that improve the value of your home or repairs that improve livability and safety. The monthly loan payments should fit comfortably into your budget.