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 repairs. They're sometimes called home renovation loans or home remodeling loans. Lenders provide these loans for up to $100,000. The loan comes in a lump sum, which you repay in monthly installments, usually over two to 12 years.
Here are the pros and cons of using personal loans for home improvement projects:
How do home improvement loans work?
Home improvement loans do not require collateral. Missed or late loan payments will negatively impact your credit, but you won’t risk losing your home.
Whether you qualify and the loan’s interest rate are based on information like your credit and income. Once approved, you may receive your loan within one to two days.
Home improvement loan rates
Home improvement loan annual percentage rates range from about 7% to 36%. Lenders decide your rate on the loan primarily by evaluating your credit score, credit history and debt-to-income ratio. Here's what current personal loan rates look like, on average:
Borrower credit rating | Score range | Estimated APR |
|---|
Excellent | 720-850. | 11.81%. |
Good | 690-719. | 14.48%. |
Fair | 630-689. | 17.93%. |
Bad | 300-629. | 21.65%. |
Source: Average rates are based on aggregate, anonymized offer data from users who pre-qualified through NerdWallet from January 1, 2024, through December 31, 2024. Rates are estimates only and not specific to any lender. The lowest credit scores — usually below 500 — are unlikely to qualify. Information in this table applies only to lenders with maximum APRs below 36%.
Key features of home remodeling loans
To find the right loan for your project, pre-qualify and compare offers from multiple lenders to find the right loan. Here are important features to compare among home improvement loans:
Annual percentage rate: APRs represent the entire cost of the loan, including 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%. Monthly payment: Even if you get a low rate, be sure the monthly payments fit into your budget. Use our home improvement loan calculator to see what loan amount, rate and repayment term you need to get an affordable monthly payment. Loan amount: Many lenders cap amounts at $30,000 to $50,000. If you think your project will cost more than that, look for a lender that offers larger loans.
Loan term: A loan with a long repayment term may have low monthly payments, but you’ll pay more interest over the life of that loan than one with a shorter repayment term.
Ability to add a co-signer or co-borrower: Some lenders let you add a co-signer or co-borrower to your application. Adding someone with better credit or higher income to the loan application may reduce your APR or increase the amount you can borrow.
Where to get a personal loan for home improvements
Online lender
Online lenders offer a convenient way to find and compare personal loans from anywhere.
Bank
Some national banks offer personal loans with competitive rates and in-person support.
Credit union
Credit unions may offer lower annual percentage rates and flexible terms for their members.
How to get a home improvement loan
Get a firm cost estimate. Identify the size of your project and get quotes or estimates to determine how much you need to borrow. Knowing the total cost can help you decide which financing option is best.
Compare options. Compare the best home improvement lenders against other financing options, like credit cards and home equity financing. You're looking for the one that costs the least in total interest, has affordable monthly payments and fits your project cost and timeline.
Check your rate and monthly payments. Many online lenders and some banks let borrowers pre-qualify to see potential personal loan offers before applying. Pre-qualifying involves a soft credit pull that doesn’t impact your score. Prepare documents. Once you've chosen a lender, gather the documents you'll need to apply. This can include W-2s, pay stubs, proof of address and financial information.
Apply. You may have to apply in person at smaller banks and credit unions, but larger ones and online lenders have online applications. Many lenders can give you a decision the same day you apply. After that, expect to see the funds in your bank account in less than a week.
How to use loans for remodeling your home
Unsecured loans can cover almost any home improvement project. How much you need varies based on your location, home size and how extensive your plans are.
Here are some common projects and how much you could pay for each, based on the most recent cost estimates available:
Project type | Estimated cost |
|---|
| $79,982. |
| $25,251. |
| $17,615. |
| $20,552. |
| $30,680. |
| $65,909. |
| $3,651. |
Sources: Remodeling Magazine 2024 Cost vs Value Report, EnergySage, Angi. | |
Home improvement loans vs. equity financing
Home improvement lending makes sense if you don’t have enough equity in your home or don’t want to use it as collateral. Equity is your home’s value minus what you owe.
If you have equity, you could get a lower monthly payment with a home equity loan or line of credit. This type of financing can take longer to fund because it typically requires a home appraisal since your house is used as collateral.
Home equity loan
Home equity loans come in lump sums and have fixed interest rates, so monthly payments never change. You repay this loan in monthly installments over a term as long as 30 years. Compare to personal loans: Home equity loans work similarly to personal loans, but they often have lower rates and longer repayment terms.
Home equity line of credit
A HELOC is an open credit line that you draw on as needed and pay interest only on what you borrow. This variable-rate option works best if you don’t know how much the home improvement will cost and are comfortable with a fluctuating monthly payment. Compare to personal loans: A HELOC lets you borrow at any time for about 10 years, which can be ideal for long-term projects or unexpected expenses. A personal loan is a fixed amount you receive at one time.
Other types of home improvement financing
Government assistance
The Inflation Reduction Act of 2022, or IRA, allows homeowners to get tax credits for energy-efficient updates, like new doors, windows, insulation, heat pumps and air conditioners. The Energy Efficient Home Improvement Credit and Residential Clean Energy Credit are listed on the IRS website. Additional rebates for larger energy-efficient updates are in progress in some states. You can check your state’s progress on the Department of Energy website. Cash-out refinancing
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.
When it’s best: Consider this option if mortgage rates are lower than the one you're paying now.
Credit card
When it’s best: Use a credit card for projects small enough that you won’t max it out. You should typically aim to pay your full balance every month. You’ll need good or excellent credit (690 credit score or higher) to qualify for a zero-interest or rewards card.
How do I choose the right home improvement financing option?
"Sometimes, the project itself will give one type of financing an edge. When I needed a new roof on my house, I went with a personal loan because that repair wouldn't wait, and borrowing against my home equity would have taken way too long. But if you're looking to borrow a larger amount for a major renovation or you want a longer time to pay back the loan, borrowing against your home equity may make more sense." 
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