Workers repairing roof
Ernest Prim/Getty Images

Not many people can afford to remodel their kitchen, build a backyard swimming pool or replace their roof without borrowing the money.

Home improvement loans are popular because they help people maintain and improve their properties without forcing them to use emergency funds or retirement savings.

Best home improvement loans for 2020

Here are the best home renovation loans to consider in 2020, along with loan details and borrowers they are best suited for:

LightStream: Best lender for long-term financing loans/strong>

This online lending arm of SunTrust Bank offers loans for major home projects with repayment terms up to 144 months, or 12 years. You may be able to borrow up to $100,000 if you qualify. You’ll get one of the lowest rates available today if you sign up for autopay, and these loans come with no origination fee and no hidden fees.

  • Average APR: 4.99% to 13.29% with autopay.
  • Credit requirement: Good or excellent credit required.
  • Good for: Highly qualified borrowers who need to borrow a lot of money at low rates with an extra-lengthy repayment term.

Read Bankrate’s expert LightStream Review.

SoFi: Best lender for all home improvements

SoFi is known for student loan refinancing, but the online lender also offers personal loans for house remodeling. You can borrow as little as $5,000 or as much as $100,000 and repay it over two to seven years. SoFi loans also come without origination fees and prepayment penalties. They even have an unemployment protection program that can temporarily pause your payments if you lose your job.

  • APR range: 5.99% to 20.01% APR with autopay.
  • Credit required: Good or excellent credit required.
  • Good for: Consumers with solid credit who need a large loan and have the ability to repay it in two to seven years.

Read Bankrate’s expert SoFi Review.

Marcus by Goldman Sachs: Best lender for small renovation loans

Marcus by Goldman Sachs is another online lender that offers both high-yield savings accounts and personal loans. Its personal loans go up to $40,000 and there are no fees. Applying online is fast and easy and you can get your funds within five days.

  • Average APR: 6.99% to 28.99%.
  • Credit required: The best interest rates go to consumers with very good or excellent credit, or FICO scores of 740 or higher.
  • Good for: Consumers who have good credit and need to borrow less than $40,000 for their project.

Read Bankrate’s expert Marchus Goldman Sachs Review.

Earnest: Best lender for large renovation loans

Earnest is known for private student loans and student loan refinancing options, but it also offers home improvement loans. You can apply online and if approved, get your money in just two business days. It’s possible to borrow up to $75,000 if you have great credit. Earnest personal loans also have no hidden fees.

  • APR range: 6.99% to 18.24%.
  • Credit required: Borrowers with great credit get the best rates, but Earnest weighs other factors to determine creditworthiness, such as your education, spending habits and future earning potential.
  • Good for: Anyone who needs to borrow up to $75,000 for a home improvement project and wants their loan funded in a matter of days.

LendingClub: Best lender for small renovation loans

LendingClub is a peer-to-peer lender that offers loans up to $40,000 for nearly any home improvement project. You can apply online and get a loan quote without a hard pull on your credit report. There is an origination fee of 1 percent to 6 percent of the loan amount, but there are no hidden fees.

  • Average APR: 6.95% to 35.89% APR.
  • Credit required: Applicants with great credit can qualify for the lowest rates, but even consumers with subpar credit may qualify for a home improvement loan with a higher interest rate.
  • Good for: Consumers with OK credit who don’t need a super-size home improvement loan.

Read Bankrate’s expert LendingClub Review.

Recap of best home improvement loan rates of 2020

Best for
Max. Loan Amount
Est. APR
Loans for long-term financing
4.99% – 13.29%
Loans for all renovations
5.99% – 16.79%
Marcus by Goldman Sachs
Loans for small renovations
5.99% – 28.99%
Loans for large renovations
6.99% – 18.24%
Loans for small renovations
6.95% – 35.89%

What is a home improvement loan?

A “home improvement loan” is usually an unsecured personal loan that is used to pay for home repairs and improvements. An unsecured loan does not require you to put up an asset, such as your house, as collateral. Home improvement loans can range from $1,000 to $100,000, with interest rates from 5.99 percent to around 36 percent if your credit is bad. Personal loans have a fixed interest rate and a fixed monthly payment and are available at traditional banks, credit unions, online lenders and peer-to-peer lenders.

There are several types of loans that can be used for house remodeling. Many homeowners take out a home equity loan or home equity line of credit (HELOC) for that purpose. The home is collateral for the loan. Because of this, rates are typically lower. One could even use credit cards for home improvements, but the cost likely would be prohibitive. Each loan has advantages and disadvantages.

The benefits of a personal loan for home renovations

It is easier and faster to get approved for a home renovation loan than it is a home equity loan or HELOC. Borrowers often can receive their entire loan amount within a few days to a week.

The lender will give you a lump sum, which allows you to start a project quickly and make down payments to contractors. Another benefit is that your monthly payments will be fixed for the life of the loan, making it easier to budget for this expense.

Remodeling your kitchen, painting your home or replacing your roof can be a pricey proposition. If you choose the right project, however, your investment can pay off for decades in personal enjoyment and improved resale value.

Personal loans for home improvements can be an attractive choice for:

  • Consumers with good to excellent credit.
  • Borrowers who have recently bought a home.
  • Homeowners looking to sell a home who need to spruce it up.
  • Homeowners who want to get their house ready to rent.

How is a home improvement loan different from a home equity loan and HELOC?

Here’s a brief list of what makes a home improvement loan different:

  • It’s unsecured: Unlike home equity loans and HELOCs, there is no need to use your home as collateral. Instead, lenders rely on your credit score and debt-to-income ratio to determine your creditworthiness and the interest rate on the loan.
  • It has a shorter repayment period: Home improvement loans are generally repaid over two to seven years, depending on the lender. In contrast, home equity loans and HELOCs have repayment options of up to 20 years.
  • There’s more flexibility: The loan amount is not limited by how much equity you have in your home. You can use as little or as much of the money as you need, especially if your project is extensive and will last more than a few months.
  • It has a fixed rate: Home improvement loans have fixed interest rates for the life of the loan, which means your monthly payments will remain the same from month to month. Borrowers can budget for their dream home without worrying about escalating monthly payments.
  • They can lower closing costs: Closing costs on equity loans can reach thousands of dollars, but many personal loans have no origination fees or they vary depending on the borrower’s credit score.

When are home equity loans or HELOCs a better option?

Home equity loans are a better option for individuals who have lived in their home long enough to build up substantial equity. Many homeowners prefer home equity loans because they offer lower, affordable interest rates. Since the homeowner has to pledge her home as collateral, there is less risk for the lender.

HELOCs give borrowers the benefit of an extended draw period for using the line of credit. The common draw period is 10 years. During the draw period, you can use as much or as little as your line of credit as you want, similar to a credit card. Your monthly payments are typically interest only. For homeowners planning a variety of home improvement projects with different costs and time frames, a HELOC might work best.

Most HELOCs come with a variable interest rate, which means your monthly payment can go up or down. The amount of interest you pay is determined by a number of factors, including interest rate levels set by the Federal Reserve, investor demand for Treasury notes and bonds, and the movement of benchmark rates used by the banking industry. Each factor can affect your interest rate.

How to use a home improvement loan to increase value

Doing home improvement projects makes it less likely you’ll have to pay for expensive repairs down the road. When you replace your roof and gutters, for example, you protect your home from water damage. Some projects add more value to your home than others.

Some home improvement projects are expensive but add little value to your property. Comparing the cost of the project to its value can help you determine your asking price when it’s time to sell.

The projects that recoup the most cost, according to the Remodeling 2019 Cost vs. Value Report, include the following:

  • Garage door replacement (97.5 percent cost recouped).
  • New manufactured stone veneer (94.9 cost recouped).
  • Minor to mid-range kitchen remodel (80.5 percent cost recouped).

What you need to apply for a home renovation loan

Shopping around will help you find the most competitive rate. Once you determine the type of home project you’re going to do, the timeline and cost, it’s time to apply for a loan.

Here’s what you’ll need to have ready before applying for a home improvement loan:

  • Your personal information: Your Social Security number, employment history, proof of income, employer information and a list of any monthly debts, such as a car loan, student loans and credit card payments.
  • Your debt-to-income ratio: You can calculate your DTI by dividing all of your monthly debt payments by your monthly income. Lenders generally consider a DTI of 36 percent or less to be acceptable, but many lenders will consider borrowers with higher ratios, depending on their income. Anything getting close to 50 percent, though, may disqualify you.
  • Your credit score: It’s smart to know what are your chances of qualifying before you apply for a loan. Get a free copy of your credit report from each of the major credit-reporting bureaus: Equifax, TransUnion and Experian. You are entitled to one free report a year from each bureau. The most favorable rates go to borrowers with the best credit scores. Every lender you apply with will check your credit score and credit history.
  • The cost of your project: Home improvement projects can vary widely in cost. Remodeling a half-bathroom won’t cost as much as replacing all the windows in your home. Before applying, know the cost of your materials and length of your project. Don’t borrow more money than you need.

How to choose the best home improvement lender

Using a personal loan for home improvements can be a quick and easy way to increase the livability, curb appeal and value of your home.

Start by shopping for a home improvement personal loan that works best for you. Compare offers from a variety of lenders such as banks, credit unions and online marketplaces.

The bottom line

You want to be sure you’re getting the most bang for your buck with any home improvement. You may think a gazebo or hot tub adds value, but the next owner may not care, so choose your projects wisely.

There are a lot of home improvement loan lenders, so shop around for the best interest rates and terms. A fraction of a point can make a big difference in your total renovation loan cost, so do the math using our loan calculator.