The best home improvement loans in February 2024

Discover Bank

Upgrade

Best for borrowers with bad credit

SoFi

Best for large home improvement projects

Patelco Credit Union

Best for small home improvement projects

Achieve

PenFed Credit Union

Best for low rates and fees

First Tech Federal Credit Union

Our picks at a glance

Why borrow a home improvement loan?

• Pay for a large project over time: You may not have sufficient savings to replace a leaky roof or renovate your outdated kitchen. A home improvement loan gives you a lump sum of cash you can use to buy supplies and pay contractors. You’ll repay the loan over a set period, often two to seven years.
• Predictable payments: Unlike a credit card, a home improvement loan has fixed interest rates, which means your monthly payments will be the same each month. This can make it easier to fit your home improvement project into your budget.
• Unsecured borrowing: A personal loan for home improvement is unsecured, which means there isn’t any collateral backing the loan. If you default on the loan, you don’t risk losing your home — though your credit scores will take a significant hit.

What is a home improvement loan?

Personal loans can be used for nearly any (legal) purpose, and one of the most common uses is financing home improvement projects. Unlike a home equity loan, which uses your home as collateral, a home improvement loan is unsecured (meaning your home isn’t subject to seizure if you can’t repay the debt). Your creditworthiness determines your eligibility, interest rate and the amount you can borrow — the higher your credit scores, the more likely you are to qualify. (And if you can’t repay a personal loan, your credit will suffer.)

Home improvement loans can be as small as $300 or as large as $100,000. You’ll repay the loan, plus interest and fees, in monthly installments over a set period, commonly two to seven years (though some lenders offer terms as long as 12 years).

Average home improvement costs

Your renovation budget largely depends on the project you’re planning. Do-it-yourself landscaping may only cost a few hundred dollars, but the cost of adding an in-ground swimming pool could approach six digits. Keep in mind that the scope of the project and your location both play a big role in your overall costs.

Before applying for a personal loan, get a few estimates from licensed contractors to understand how much you’ll need to budget. Here’s a look at the average costs of some common home renovations.

A look at home improvement loan rates

Since personal loans are unsecured, your credit scores are a major factor in determining your interest rate. Generally, interest rates on home improvement loans range from 7% to 36% (or 7% to 18% at federal credit unions), with a lender’s lowest rates going to borrowers with high credit scores and low levels of debt. A shorter repayment term or a lower loan amount also typically results in a lower rate.

Here’s a look at personal loan interest rates by credit score:

Example: Let’s say you want to borrow $25,000 for a kitchen renovation, so you request loan offers from three lenders. Notice that Loan 2’s shorter repayment period comes with a lower interest rate. But even with a more competitive rate, the monthly payment is much higher.

If you need to keep your monthly dues as low as possible, Loan 1 may be your best bet. However, if you can afford the higher monthly payment, Loan 2 has the lowest overall cost of borrowing, saving you more than $9,000 in interest payments due to the shorter loan term.

Pros and cons of home improvement loans

Although some lenders offer secured loans, most home improvement loans don’t require collateral. This means that you won’t risk losing your home (or other asset) if you default — however, if you can’t make the payments, your credit scores will be heavily impacted.

Personal loans have fast funding timelines compared to other financing options. Depending on the lender, you may receive the funds the same day you get approved, within 24 hours or a few business days. These loans have fixed interest rates and set repayment terms, so your monthly dues will be the same each month, and you’ll know how long it will take to repay your debt.

However, you may have to settle for high interest rates if you don’t have good-to-excellent credit or a creditworthy co-applicant. Many lenders also charge origination fees, an upfront administrative charge taken out of your loan at disbursement. A personal loan for home improvement can be a useful financial tool, but other alternative forms of financing may offer lower interest rates (more below).

What to consider when comparing home improvement loans

Not all home improvement loans are created equal. The rates, terms and amounts you receive will vary by lender, so shop around for the best installment loans before signing on the dotted line. Consider the following factors to make an apples-to-apples comparison:

• APRs: The annual percentage rate (APR) will determine the cost of your loan, accounting for the interest rate and fees. A higher APR translates to a higher overall cost of borrowing.
• Repayment terms: Home improvement loans typically range from one to seven years. While a longer term means smaller monthly payments, you’ll also pay more in interest over the life of the loan.
• Loan amounts: Depending on the lender and your credit profile, you can borrow anywhere from a few hundred dollars to $100,000 or more. Calculate the cost of your project before borrowing so you can choose a lender that offers the amount you need and avoid overborrowing.
• Option to add a cosigner or co-borrower: If you have less-than-perfect credit, a cosigner or co-borrower can help you qualify for a home improvement loan at a more reasonable rate. Both cosigners and co-borrowers will be on the hook for repayment if you fall behind, but co-borrowers share access to loan funds while cosigners don’t.
• Eligibility requirements: Lenders will assess your credit scores, payment history, income and current debt before they approve you for a home improvement loan. Generally, you’ll need good credit scores (670 or higher) and a debt-to-income (DTI) ratio below 36%. (To calculate your DTI ratio, divide your total monthly debts by your gross monthly income.)
• Customer service reviews: Independent organizations like the Better Business Bureau (BBB) and the Consumer Financial Protection Bureau (CFPB) can help you understand how lenders treat their borrowers.
• Unique lender perks: Some lenders go the extra mile and offer perks like free credit monitoring, programs for financial hardship and rate discounts.

Getting a home improvement loan in six steps

1. Check your credit. Your credit card issuer or financial institution may offer free access to your credit scores, or you can pay for them through various third-party services. Visit AnnualCreditReport.com to pull free copies of your credit reports. If necessary, take steps to improve your credit scores before applying for a loan, like paying down other debt. Knowing where your credit stands will give you an idea of the rates you may receive and which lenders are the best fit.
2. Determine your budget. Next, consider how much you can afford to spend on your home improvement project. Your budget should include some wiggle room in case labor or material costs are higher than expected.
3. Get pre-qualified with multiple lenders. Rates and terms can vary widely between lenders, so don’t settle for the first lender you find. Many lenders allow loan pre-qualification, which lets you check your eligibility and potential rates and terms without impacting your credit scores.
4. Compare loan offers. Examine APRs, terms and amounts to zero in on the ideal home improvement loan, and use a personal loan calculator (like this one from Calculator.net) to understand how each offer fits into your budget. Don’t forget to research each lender to learn about their reputation and customer service track record.
5. Gather your financial documents. While the documents required can vary by lender, you’ll likely need a government-issued ID, your Social Security number, pay stubs and proof of residency, like a mortgage statement.
6. Submit a formal application. Smaller banks and some credit unions may require you to visit a branch in person to apply, but most lenders offer a fully online application process. You may receive a loan decision the same day you apply, and your funds can typically be deposited into your account within several business days (though some lenders offer same-day disbursal).

Other home improvement financing options

The lenders featured above offer personal loans that you can use to pay for your home improvement project. However, a personal loan isn’t your only financing option and may not always be the cheapest. A loan secured by your home can unlock access to lower rates and longer repayment terms.

Good to know: Each home equity financing option below carries the risk of foreclosure. Since your home is collateral for the loan, your lender can begin foreclosure if you fail to repay the loan as agreed.

Home equity loan

Best if: You know exactly how much your home improvement project will cost

Also known as a second mortgage, this form of financing allows you to borrow against your home equity and receive a lump sum of money. Typically, you can borrow up to 80% to 85% of your available equity — that is, the appraised value of your home minus your mortgage balance. Other home equity loan requirements include credit scores above 620 and a DTI under 36%.

You’ll repay your home equity loan over a fixed term that may be as long as 30 years, and you’ll likely pay lower rates than with a personal loan. You’ll need to schedule a home appraisal, and the entire process may take about six weeks.

Check out our list of the best lenders for home equity loans.

Home equity line of credit

Best if: You need borrowing flexibility and don’t mind the variable rate

Like a home equity loan, a home equity line of credit (HELOC) is also based on the amount of equity you’ve built in your home — but rather than receiving a lump sum, you’ll access a revolving line of credit. You can withdraw as much as you’d like on an as-needed basis, up to your credit limit, which is usually capped at 85% of your home equity.

While a line of credit can give you flexibility if you’re unsure how much your project will cost, you may be tempted to overborrow. HELOC rates are variable, which can make budgeting difficult — your interest rate changes with the market, and your dues will also adjust based on how much money you’ve drawn from the HELOC.

Cash-out refinancing

Best if: Mortgage rates are lower than what you’re currently paying

With a cash-out refinance, you replace your current mortgage with a new, larger mortgage, pocketing the difference in cash. This option makes the most sense if you can secure a lower interest rate — if your mortgage rate will increase as a result of refinancing, consider a home equity loan or HELOC instead.

Remember that you’ll have to pay closing costs, which are typically 2% to 6% of your mortgage amount. Check out our list of the best mortgage refinance lenders.

Government programs

Best if: You meet FHA eligibility criteria

Backed by the Federal Housing Administration (FHA), a 203(k) FHA loan combines your mortgage and repair costs into a single loan. Credit score requirements are lower on FHA loans than traditional mortgages, but your home will have to qualify for this form of financing — for 2024, the cost of repairs must be at least $5,000, and the value of your home must be under $498,257 in most areas. Plus, you’ll have to hire a consultant from the U.S. Department of Housing and Urban Development (HUD) to oversee the renovations.

If your total repairs cost less than $25,000, consider an FHA Title 1 loan instead. These loans have the same relaxed credit requirements, but you won’t have to replace your current mortgage.

Methodology

To determine the best lenders for home improvement loans, our editorial team and data analysts scrutinized 27 popular personal loan lenders. Striving to be as objective as possible, we designed a rubric that enabled us to make apples-to-apples comparisons across 30 loan features. After analyzing over 800 data points, we created out-of-five-star ratings for each lender. Here are the four categories we considered:

Loan cost (30%)

Keeping costs as low as possible is top-of-mind for most borrowers, so we awarded points to lenders that offer the lowest interest rates, fewer fees and more opportunities for rate discounts. Lenders that allow you to check rates through pre-qualification with only a soft credit pull also fared well.

Loan details (25%)

Here, we rewarded lenders that offer features well-suited for home improvements, including larger borrowing amounts and longer repayment terms. We also favored lenders that can approve and fund loans quickly.

Accessibility (30%)

We believe that the best loan is available to the widest variety of borrowers. To that end, we analyzed how accessible each loan is by asking questions like:

• What credit score does the lender require?
• Are loans available nationwide?
• Does the lender allow cosigners or co-borrowers?
• Is eligibility restricted to a certain group of borrowers?

Repayment experience (15%)

When the paint has dried and your home improvement project is done, you want a lender that offers a seamless and positive repayment experience. We examined each lender’s customer service options, including extended support hours and mobile app availability. We also leveraged data from independent organizations — such as the Better Business Bureau and the Consumer Financial Protection Bureau — to better understand lenders’ past behavior toward borrowers.

What didn’t make the cut

We analyzed more than two dozen lenders before narrowing our list to the top eight. Many financial institutions didn’t measure up in various categories, often for a lack of transparency. Here’s a look at a few popular lenders that didn’t clear the bar:

• BHG Money and OneMain Financial charge high starting APRs.
• Avant, PNC Bank and LendingPoint have small loan amounts.
• Upstart and Rocket Loans only offer two repayment term options.
• Wells Fargo and Citi receive low consumer satisfaction ratings.