Best of
Best Home Improvement Loans of October 2020
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A home improvement loan can help you pay for repairs, renovations and additions to your home. Compare offers from multiple lenders to find the best rates and terms.
Banks, online lenders and credit unions all offer home improvement loans. This kind of personal loan is among a handful of options for financing home renovations. Consider a home improvement loan if you don’t have a lot of equity in your home or don’t want to use it as collateral. Always compare offers from multiple lenders to find a loan that suits the size of your project and your budget.
Banks, online lenders and credit unions all offer home improvement loans. This kind of personal loan is among a handful of options for financing home renovations. Consider a home improvement loan if you don’t have a lot of equity in your home or don’t want to use it as collateral. Always compare offers from multiple lenders to find a loan that suits the size of your project and your budget.
Summary of Best Home Improvement Loans of October 2020
| Lender | NerdWallet Rating | Est. APR | Min. Credit Score | Learn More |
|---|---|---|---|---|
Best for Loans for large home renovations | 5.49 - 20.49% | 660 | on LightStream's website | |
Best for Loans for large home renovations | 5.99 - 18.53% | 680 | on SoFi's website | |
Best for Loans for large home renovations | 5.49 - 24.49% | 600 | See my rates on NerdWallet's secure website | |
Best for Loans for small home renovations | 6.99 - 19.99% | 680 | on Goldman Sachs's website | |
Best for Loans for small home renovations | 10.68 - 35.89% | 600 | See my rates on NerdWallet's secure website |
Our picks for
Loans for large home renovations
LightStream, SoFi and Wells Fargo work for larger renovations, as the lenders have higher loan amounts — up to $100,000.
on LightStream's website
LightStream
Min. Credit Score
Est. APR
Loan Amount
on LightStream's website
on SoFi's website
SoFi
Min. Credit Score
Est. APR
Loan Amount
on SoFi's website
on NerdWallet's secure website
Wells Fargo Personal Loan
Min. Credit Score
Est. APR
Loan Amount
on NerdWallet's secure website
Our picks for
Loans for small home renovations
With lower starting loan amounts, Marcus and LendingClub are two options for borrowers planning smaller home improvement projects.
on Goldman Sachs's website
Marcus by Goldman Sachs
Min. Credit Score
Est. APR
Loan Amount
on Goldman Sachs's website
on NerdWallet's secure website
LendingClub
Min. Credit Score
Est. APR
Loan Amount
on NerdWallet's secure website
What is a home improvement loan?
A home improvement loan is an unsecured personal loan that you use to cover the costs of home upgrades or fixes. Lenders provide home improvement loans for up to $100,000 with rates typically between 6% and 36%.
Because you don’t put up your house as collateral for the loan, your rate is based on your credit and income information. If you can’t repay the loan, your credit will take the hit.
Should you get a home improvement loan?
A home improvement loan can make sense if you don’t have a lot of equity in your home or you don’t want to use your home as collateral.
Ideally, you can qualify for a low rate and monthly payments that you can afford for the life of the loan. Payments on home improvement loans are usually fixed, which means you can reliably schedule monthly payments into your budget.
Here are some things to consider about personal loans for home improvement projects:
High rates. Since the loan is unsecured, the interest rate may be higher than on a home equity loan or home equity line of credit, which typically have rates in the single digits.
Fast funding options. Online applications typically take a few minutes, and funds are available within a day or two at some lenders, while funds from a HELOC or home equity loan can take a few weeks. Learn how to apply for a personal loan for a smoother process.
No tax benefits. You can’t claim a tax deduction on the interest on personal loans as you might be able to do with mortgage interest.
How to compare home improvement loans
Shopping around and pre-qualifying can help you find the loan with the best rate and features. Here are some things to compare between unsecured loans.
Annual percentage rates: APRs represent the entire cost of the loan, including any fees the lender may charge. If you’re a member of a credit union, that may be the best place to start. The maximum APR at federal credit unions is 18%.
Loan amount: Some lenders cap amounts at $35,000 or $40,000. If you think your project will cost more than that, look for a lender that offers higher loan amounts.
Loan term: Loans with longer repayment terms have more affordable monthly payments than those with shorter repayment terms. But a longer repayment term also means you’ll pay more interest over the lifetime of the loan. You can use a personal loan calculator to see estimated payments on different loan terms.
Home improvement loan uses
Unsecured loans can cover almost any repair or upgrade. How much you’ll need will vary based on your location, home size and how extensive your plans are.
Americans spent a median of $6,500 on room additions and renovations in 2017, according to the most recent available data from the U.S. Census Bureau’s American Housing Survey.
Here are some common projects and their estimated median costs.
Project type | Estimated cost |
|---|---|
$68,490 | |
$21,377 | |
$20,000 | |
$14,360 | |
$6,600 | |
$4,800 | |
$3,500 | |
Sources: The U.S. Census Bureau's 2017 American Housing Survey, Remodeling Magazine 2020 Cost vs Value Report, HomeAdvisor, Center for Sustainable Energy. | |
What are your options for financing a home improvement project?
You have a long list of options to finance your project, including a home equity loan or line of credit, cash-out refinancing or an unsecured home improvement loan to pay for your home improvement project.
There are lenders that offer home improvement loans for bad credit, but if you don’t qualify or you want a lower rate, here are other options.
Federal programs
Some government programs can help pay for a home renovation. The Federal Housing Administration has two programs: Title I loans and Energy Efficient Mortgages. You can look for a “Title I Property Improvement” lender in your state on the HUD website.
When it’s best: Consider applying if your project and finances meet the criteria outlined by these programs. They can help make upgrades more affordable.
Home equity loans and HELOCs
If you have equity in your home, a low-interest secured loan may be your best choice.
HELOCs have variable rates and allow you to borrow as you go and repay only what you borrow. A home equity loan, on the other hand, has a fixed rate and comes to you in a lump sum that you repay over time.
Both options are typically cheaper than personal loans, with repayment terms up to 20 years. These home-equity options use your home as collateral, meaning you could lose your house if you fail to repay.
Compare home equity loans and HELOCs to decide which fits best with your plans.
When it’s best: If you have equity in your home, you want a low rate and longer repayment period, and you don’t mind putting your house up as collateral.
Cash-out refinancing
You can refinance your existing mortgage into a higher loan amount and use the difference to pay for your renovation.
When it’s best: Consider this option if current mortgage rates are lower than the one you're paying now.
Credit cards
There are some strategic ways to use a credit card to cover the cost of your upgrades. You can use a card with 0% introductory APR for short-term home improvement projects.
When it’s best: You’ll need good or excellent credit (690 or higher) to qualify for a 0% APR card. If you qualify, your purchases won’t accrue interest during the promotional period, typically 12 to 18 months.
Last updated on September 3, 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 of October 2020
- LightStream: Best for Loans for large home renovations
- SoFi: Best for Loans for large home renovations
- Wells Fargo Personal Loan: Best for Loans for large home renovations
- Marcus by Goldman Sachs: Best for Loans for small home renovations
- LendingClub: Best for Loans for small home renovations
Frequently asked questions
A home improvement loan often refers to an unsecured personal loan with a fixed interest rate that you repay in monthly installments over one to 12 years. Unlike home equity loans or HELOCs, the loans are not secured by your home, and approval is based mainly on your creditworthiness.
The best way to finance home improvements depends on factors such as your home equity, how much money you need to borrow and your credit score. In addition to personal loans, options include home equity loans and HELOCs, cash-out refinancing, 0% introductory APR credit cards, and federal programs.
Home improvement loans may be a good idea when used toward renovations that improve the value of your home. Loans are also beneficial to cover home repairs to improve livability and safety. As with any debt, calculate the costs, including monthly payments, to ensure it fits into your budget.
You should get a personal loan for home improvement if you don't have enough equity or don't want to use your home as collateral for the loan. Borrowers with good or excellent credit, little existing debt and high incomes often get the best personal loan rates.
With a home improvement loan, you don't use collateral to get financing. Instead, lenders review your finances and creditworthiness to qualify you, and interest rates are higher.
With a home equity loan, you borrow against the equity you have in your home to pay for home improvements. Rates are lower, but because the financing is secured by your home, you risk losing your home if you fail to repay.
Consider your credit, income and equity to decide which is right for you.
