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Home Improvement Loans: Compare Your Options

April 18, 2018
Loans, Personal Loans
Mortgage Rates Today, Jan. 9: Little to No Change; FHA Cuts Insurance Premiums
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We adhere to strict standards of editorial integrity. Some of the products we feature are from our partners. Here’s how we make money.

Whether you’re remodeling your kitchen or replacing your roof, you have many options to pay for home improvements, including a home equity loan and credit cards. But if you don’t have a lot of equity in your home or you’d rather not rack up credit card debt, consider a home improvement loan.

Personal loans for home improvement

LenderTypical APR rangeLoan termLoan amounts
Earnest
4.0 stars out of 5
5.49% - 18.24%3 to 5 years$5,000 - $75,000
LightStream
4 stars out of 5
3.09% - 14.24% with autopay; 3.59% - 14.74% without autopay2 to 7 years$5,000 - $100,000
Marcus by Goldman Sachs
5.0 stars out of 5
6.99% - 24.99%3 to 6 years$3,500 - $40,000
SoFi
5 stars out of 5
6% - 15%3 to 7 years$5,000 - $100,000
Wells Fargo
3.5 stars out of 5
6.99% - 23.99%1 to 5 years$3,000 - $100,000
Click to compare estimated rates on NerdWallet.


A personal loan used for home improvement is like any unsecured personal loan: It’s not guaranteed by your home, the rate you receive depends on your creditworthiness, and it’s usually fixed, which means you can reliably schedule monthly payments into a budget.

Consider a personal loan if you don’t have much equity in your home, the project is relatively small and you can pay off the loan within seven years.

All lenders look at your credit, but some online lenders also consider other factors, such as education, income and profession. Most lenders offer the same range of rates for their personal loans regardless of why you’re borrowing.

Loan example: A borrower with excellent credit who takes out a $20,000 home improvement loan with a five-year repayment term at 13.9% APR would make monthly payments of $464, according to NerdWallet’s personal loan calculator.

Details about home improvement loans

  • You can use a personal loan for any purpose, whether it’s for a major home repair, a kitchen remodel or a smaller project. You control how you use the funds.
  • Since the loan is unsecured, the interest rate may be higher than on a home equity loan or home equity line of credit. Rates from online lenders range from 4% to 36%. Current rates for home equity loans and HELOCs are usually in the single digits.
  • Online applications typically take a few minutes, and funds are available within a day or two at some lenders, although this may depend on how fast you complete the application and submit the necessary documents.
  • You can’t claim a tax deduction on the interest as you can with mortgage payments.

» MORE: See estimated rates for personal loans

More loan options

If you don’t qualify for an online personal loan or you want to try to get a lower rate, here are some other potential options.

Credit unions: Your local credit union may be the best place to get a personal loan, especially if your credit isn’t perfect. Credit unions offer lower rates than online lenders, and they try to make sure your loan is affordable. The maximum annual percentage rate at federal credit unions is 18%.

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.

Under Title I, the Department of Housing and Urban Development authorizes lenders in each state to make home renovation loans, with rates based on market rates and your creditworthiness. Look for a “Title I Home Improvement” lender in your state on the HUD website.

The Energy Efficient Mortgage program lets homeowners finance part of their energy efficiency improvements, such as solar panel roofing, wall insulation and furnace duct repairs.

Credit cards: If you have excellent credit and a small- to medium-sized home improvement project, you can apply for a 0% interest credit card to cover the expenses. If you qualify, you’ll pay no interest charges for a promotional period, typically 12 to 18 months.

However, as with any credit card, you may be tempted to overspend, and using too much of your available credit limit can hurt your credit score.

» MORE: Should you put your home renovation on a credit card?

Home equity loans and HELOCs: If your credit isn’t great and you have equity in your home, you may be better off with a low-interest secured loan.

Home equity loans and home equity lines of credit are popular ways to finance a home renovation, and both are cheaper than personal loans, with longer repayment terms up to 20 years. Keep in mind that you can lose your home if you fail to repay the loan.

» MORE: Home equity loan vs. line of credit

Cash-out refinancing: You can refinance your existing mortgage into a higher loan amount and use the difference to pay for your renovation. Rates vary by lender, loan amount and the equity in your home. The interest payments on all types of home loans are usually tax-deductible.

» MORE: Compare home improvement financing options

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