What Is a Home Improvement Loan?
A home improvement loan is an installment loan that provides the funds needed to repair or remodel a house. For example, a borrower might use a home improvement loan to remodel a kitchen, refinish a basement, put on siding, build a deck or install a swimming pool. It’s worth noting that most loan providers don’t offer loans specifically for home improvements, so most people get a general personal loan or home equity loan to finance their home projects.
Best Home Improvement Loans
These are the best personal loans for home improvement from our partners. They offer low fees, large loan amounts and low minimum APRs. Learn more about the best home improvement loans.
How Do Home Improvement Loans Work?
Home improvement loans can help fund projects in and around your house, and they work pretty similarly to other installment loans. The biggest difference between the two main types of home improvement loans – personal loans and home equity loans – is that a personal loan is unsecured. In contrast, a home equity loan is secured by your house, so you could lose your home if you can’t pay it back.
To get a home improvement loan, you’ll have to apply for a loan and wait for a decision, which you should receive within 7 business days if not immediately. If you’re approved, you'll get the money as a bank transfer or check, which may take another 1 to 10 business days. Then, you can use the money to finance your home improvement expenses. Finally, you’ll have to pay back the loan in fixed installments, and the lender will report information about the loan to the credit bureaus each month.
Learn more about how home improvement loans work.
How to Get a Home Improvement Loan
- Check your credit score. The typical credit score required for a home improvement loan is between 580 and 700, depending on the lender.
- Check for pre-qualification with multiple lenders. Pre-qualifying shows you your approval odds and what rates may be available to you.
- Compare your loan options. The most important factors you need to consider are the loan’s APRs, fees, repayment periods and dollar amounts.
- Choose the best loan and submit an application. You’ll need to give the lender some personal and financial information, such as your name, address, income and employment status.
- Wait for a decision. You may receive a decision quickly or it may take a few business days.
- Wait for the funds to be delivered. You should get your funds within 7 business days after being approved.
Learn more about how to get a home improvement loan.
Types of Home Improvement Loans
There are a few different types of borrowing methods you can use to improve your house, including personal loans and home equity loans. You can use the funds from these borrowing methods for almost anything. Keep in mind that home equity loans (and home equity lines of credit) require you to use your home as collateral.
5 Ways to Borrow Money for Home Improvements
- Personal loans
- Home equity loans
- Home equity lines of credit
- Credit cards
- Friends and family
Learn more about the different types of home improvement loans.
Pros & Cons of Home Improvement Loans
|Ability to finance a project||Increased debt level|
|Project might increase home value||May require collateral|
|Wide range of loan sizes||May charge fees|
|Low minimum APRs||High maximum APRs|
Pros of Home Improvement Loans
- Ability to finance a project: You can fund a home improvement project without having to save up cash for it, then pay off the debt over time.
- Project might increase home value: Improving your house often makes it worth more money when you eventually sell it. This increase in property value can offset the costs of the loan.
- Wide range of loan sizes: You can get as much as $100,000 in funding with a personal loan, and potentially even more with a home equity loan.
- Low minimum APRs: Personal loans offer APRs as low as 4%, and home equity loans can be even cheaper. Plus, if your project is small enough, you might be able to finance it with a 0% APR credit card.
Cons of Home Improvement Loans
- Increased debt level: Having more debt will hurt your credit score. But in the long run, your score will bounce back if you make your loan payments on time every month.
- May require collateral: Home equity loans use your house as collateral, so you put yourself at risk of foreclosure if you can’t repay the loan. Most personal loans don’t require collateral, but there are secured personal loans targeted toward people with low credit scores.
- May charge fees: Depending on the type of loan and the lender, you may have to pay fees. For example, if you choose a personal loan, you might have to pay an origination fee of 1% to 8% of the loan amount. If you use a credit card, you might owe an annual fee.
- High maximum APRs: Home equity loans usually don’t charge more than 7%, but personal loans can charge up to 36%. Credit card regular APRs can be expensive, as well.