Roof Loans: Financing Your Roof With a Personal Loan

» MORE: Compare home improvement loans

Personal loans for a roof

Personal loans are unsecured loans that provide a fixed amount of money that you repay over a period of two to seven years. Annual percentage rates range from about 6% to 36%, and qualifying depends primarily on your credit profile.

Borrowers with good to excellent credit (690 or higher on the FICO scale) have the best chances of qualifying and receiving low rates on a roof loan. For borrowers with lower credit scores, there are some lenders that offer home improvement loans for bad credit, but you can expect a higher interest rate.

» MORE: See estimated payments with a home improvement loan calculator

This type of roof loan is a good option if you don’t have enough equity to borrow against your home and you don’t want to max out a credit card. Consider these pros and cons of roof loans:

Pros

• No collateral: Because personal loans are unsecured, you don’t have to pledge your home or another asset and then risk losing it if you can’t repay the loan.
• Fast funding: With some online lenders, you may get your funds the same or next day after approval, while others may take up to a week.
• Lower rates than credit cards: Especially for borrowers with strong credit, average personal loan rates are lower than average credit card rates.

Cons 

• Higher rates than home-equity options: With no collateral backing the loan and shorter repayment terms, personal loans have higher interest rates than home equity loans and lines of credit.
• No tax benefits: Unlike with some home equity loans and lines of credit, you can’t claim a tax deduction on the interest you pay on a personal loan.

Most online lenders allow you to pre-qualify to check the rate and terms you might receive on a loan. The pre-qualification process doesn’t impact your credit score, so it’s smart to pre-qualify with multiple lenders to compare options.

» MORE: Pre-qualify for a personal loan on NerdWallet

Other ways to finance roof repairs and replacements

Credit cards

Credit cards work best for lower-cost repairs that you can pay for over 12 to 18 months. Borrowers with strong credit may qualify for a 0% interest credit card that has a promotional period during which you pay no interest.

» MORE: Calculate the right financing option for your remodel

Home equity

The benefits of using the equity in your home to finance a new roof include lower rates, longer repayment terms up to 20 years, and a potential tax deduction for interest payments. But funding takes longer since the process requires an appraisal and title search.

Borrowers typically must have about 20% equity in their home to qualify, and because your home is used as collateral, failing to make payments can put your home at risk.

» MORE: Best home equity lenders

Government-insured loans

Home improvement loans insured by the Federal Housing Administration require lower minimum credit scores than conventional mortgages. FHA-backed options are:

FHA 203(k) standard loans can cover costs of at least $5,000. The process involves refinancing your existing mortgage with an FHA 203(k) loan and rolling the roof replacement costs into the new mortgage.

FHA Title I loans are fixed-rate loans designed for home improvements. Loans up to $7,500 are unsecured, while those $7,500 and higher are secured by a mortgage or deed of trust on the property.

Roofing companies

Your roofer may offer in-house financing or loans through a third-party financial company, such as GreenSky. Rates and terms depend on the roofing company and your credit score.

Carefully read the loan offer’s terms and conditions. For example, the loan may offer a no-interest or reduced-interest introductory period, but then charge a high interest rate on unpaid balances after the promotion expires.

Roof financing tips

Check your homeowners insurance: A roof damaged in a storm may be covered under your homeowner’s insurance policy. You may have to pay a deductible before the insurance coverage kicks in.

Home warranty coverage: If you’ve purchased a home warranty service, or your home is new and covered under home warranty, it may cover roof repairs due to leaks.

Shop around: Compare estimates from multiple roofers to get a competitive price on materials and labor. The estimates should include all expected costs, plus a warranty that covers any defects in roofing materials or labor.

» MORE: Roof replacement cost: How to save money