Ready to turn your fixer-upper into the house of your dreams? Whether it’s a full renovation or just upgrading that old kitchen backsplash, home improvement projects aren’t cheap. The good news is you’ve got options for funding your next big project. From personal loans to home equity lines of credit, let’s breakdown some of the best loan options to help you realize your home upgrade goals.
Looking for the perfect loan to tackle your home improvement projects? MoneyLion can help you find personal loan offers up to $100,000 from top providers. Compare various lenders’ rates, terms and fees and pick the loan that fits your budget and timeline. Because who has time to hunt down offers when you could pick out new tiles for that dream bathroom?
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7 Best home improvement loans
There’s no “one-size-fits-all” for home improvement loans, but we’ve rounded up some of the top options based on different needs. Whether you’re looking for flexibility, low interest rates or fast approval, here’s a breakdown of the best choices.
1. Best for quick approval: LightStream
LightStream is the go-to if you need funds fast for your home improvement project. With loans ranging from $5,000 to $100,000, LightStream offers same-day approval and funding with competitive interest rates. You’ll need a good credit score (typically 660 or higher) to qualify, but the process is seamless and there are no fees to worry about. Apply online, get approved and start knocking down walls tomorrow.
2. Best for no fees: SoFi
SoFi offers perfect personal loans if you hate the word “fees.” With no origination fees, no prepayment penalties and loan amounts ranging from $5,000 to $100,000, SoFi gives you flexibility without the hidden costs. You’ll need a credit score of at least 680 to qualify, but SoFi’s perks – like unemployment protection and member benefits – make it a top choice for home improvement loans.
3. Best for borrowers with fair credit: Upgrade
If your credit score is less than perfect, Upgrade has your back. Specializing in loans for fair credit borrowers (with scores as low as 560), Upgrade offers loans up to $50,000 with quick approval. The trade-off? There are slightly higher interest rates and an origination fee between 2.9% and 8%. Still, this is a solid option if you need cash for your project and your credit isn’t stellar.
4. Best for low interest rates: Discover Personal Loans
Discover Personal Loans offers some of the lowest fixed APRs, starting at 6.99% and no fees. They’ll lend you up to $40,000 for your renovation, but you’ll need a credit score of 660 or higher to qualify. Discover stands out because of its fixed rates and flexible repayment options, ranging from three to seven years. Plus, no penalties if you pay it off early.
5. Best for home equity loans: U.S. Bank
If you’ve got equity in your home and you’re looking for a bigger loan, U.S. Bank offers competitive home equity loans with rates lower than personal loans. You can borrow up to 85% of your home’s value at fixed rates and repayment terms range from 5 to 30 years. The downside? You’ll need a solid credit score and some serious home equity to qualify.
6. Best for HELOC: Bank of America
For those who prefer flexibility, a Home Equity Line of Credit (HELOC) from Bank of America could be your best bet. With low introductory APRs and the ability to draw from your credit line as needed, it’s perfect for ongoing projects. You’ll need at least 15-20% equity in your home and a credit score of 680 or higher.
7. Best for FHA loans: Wells Fargo
Wells Fargo’s FHA program is ideal for major renovations requiring government-backed loans. You can borrow up to 110% of your home’s future value and the Federal Housing Administration backs the loan. It’s a great option if you need extensive repairs and don’t qualify for conventional loans. The downside? A credit score of at least 580 and mortgage insurance premiums.
How do home improvement loans work?
A home improvement loan is essentially a way to borrow money to cover the costs of your home upgrades. These loans can be unsecured (like personal loans) or secured (like home equity loans). The amount you qualify for, the interest rates and repayment terms will depend on your credit score, the amount you want to borrow and the type of loan you choose.
Types of home improvement loans
Let’s talk about your options. Not all home improvement loans are created equal and depending on your financial situation and project size, one type might be better for you.
Conventional mortgage renovation loans
Conventional renovation loans roll the cost of your home improvements into your mortgage. This is ideal if you’re buying a fixer-upper or refinancing your current home to fund renovations. To qualify, you must meet the mortgage lender’s credit score and income requirements.
Personal loans
Unsecured personal loans are fast and flexible. You don’t need to put your home up as collateral, but your interest rates might be higher compared to secured loans. They’re a great option if you need money quickly and don’t want to deal with home equity.
Home equity loans
A home-equity loan lets you borrow against the value of your home, making it a solid option if you’ve built up equity. These loans typically come with lower interest rates because your home secures them. You may risk foreclosure if you can’t make payments.
Home equity lines of credit (HELOC)
A HELOC works like a credit card, allowing you to borrow as much as you need, up to a certain limit when you need it. It’s ideal for ongoing projects where costs might fluctuate. Just be mindful of variable interest rates.
Cash-out refinancing
With cash-out refinancing, you replace your current mortgage with a new one larger than what you owe. The difference goes straight into your pocket, which you can use to fund home improvements. It’s great for homeowners with significant equity but comes with higher closing costs.
FHA 203(k) rehab loans
This government-backed loan is specifically designed for home renovations. It lets you borrow based on the projected value of your home after improvements. While the interest rates can be lower, there are stricter requirements, like mandatory mortgage insurance.
How to compare and choose the best home improvement loan
Not all loans are created equal, so here’s what to keep in mind when choosing the right one:
Check your credit score: Higher scores usually mean better rates.
Compare offers from multiple lenders: Don’t settle for the first offer you get – shop around.
Look for the lowest interest rate: A lower interest rate means less money paid back over time.
Consider loan terms and repayment period: Shorter terms mean higher payments, but you’ll pay less interest overall.
Evaluate fees and closing costs: Some loans come with hefty fees – make sure you account for those.
Get prequalified before applying: Prequalification gives you an idea of what you can borrow without affecting your credit score.
Nail Your Home Improvement Financing
Choosing the right loan for your home improvement project balances cost, convenience and risk. Whether after a quick personal loan or leveraging your home’s equity for a big project, understanding the loan types and comparing offers will help you make the best decision.
FAQs
How long are home improvement loans?
Home improvement loans can range from one to 30 years, depending on the type. Personal loans typically have shorter terms, while home equity loans or cash-out refinances can stretch over decades.
Can you borrow more for home improvements?
Yes, depending on your loan type and equity. Some loans, like HELOCs or cash-out refinances, let you borrow more as your home’s value increases.
What type of loan is best for a home addition?
Home equity loans or FHA 203(k) rehab loans are often the best choice for large projects like home additions, as they allow for larger loan amounts with lower interest rates.
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