What you need to know about home improvement loans
Reviewed by
Mark Kantrowitz, Bankrate Financial Review Board memberAs of Sunday, June 13, 2021
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When shopping for the best home improvement loan, look for the lowest interest rate, an affordable repayment term and low to no fees. Loan details presented here are current as of the publish date. Check the lenders’ websites for the most up-to-date information. The top lenders, listed below, are selected based on factors such as APR, loan amounts, repayment terms, credit requirements and broad availability.
Best home improvement loan rates in June 2021
| LightStream |
Long-term financing
|
3.99%–16.99% (with autopay)
|
$5,000–$100,000
|
Not specified
|
| SoFi |
Unemployment protection
|
5.99%–18.28% (with autopay)
|
$5,000–$100,000
|
680
|
| Marcus by Goldman Sachs |
Minor home improvements
|
6.99%–19.99% (with autopay)
|
$3,500–$40,000
|
Not specified
|
| TD Bank |
Convenience
|
6.99%–21.99%
|
$2,000–$50,000
|
Not specified
|
| LendingClub |
Emergency home repairs
|
8.05%–35.89%
|
$1,000–$40,000
|
600
|
| Best Egg |
Consumers with limited credit history
|
5.99%–29.99%
|
$2,000–$50,000
|
600
|
| Upstart |
Consumers with below-average credit
|
8.27%–35.99%
|
$1,000–$50,000
|
620
|
| Prosper |
Online-only experience
|
7.95%–35.99%
|
$2,000–$40,000
|
640
|
Current home improvement loan rates
Average home improvement loan rates currently range from around 3 percent to 36 percent. While the rate you're quoted depends on many factors, the most important is usually your credit score; the higher your credit score, the lower your rate. Many lenders provide their minimum credit score requirements, as well as the credit score needed to receive the lowest rate. However, even if your score is closer to the minimum, it's still worth going through prequalification, as lenders may also factor in things like your annual income and employment status when determining your rate.
Summary: Home improvement loans in 2021
What is a home improvement loan and how does it work?
A “home improvement loan” is usually an unsecured personal loan used to pay for home repairs and improvements. An unsecured loan does not require you to put up an asset, like your house, as collateral. Loans can range from $1,000 to $100,000 and typically have a fixed interest rate and a fixed monthly payment. They are available from traditional banks, credit unions, online lenders and peer-to-peer lenders.
When you're approved for a home improvement loan, you receive all funds up front, which you can then use to make your renovations. As soon as funds are disbursed, you'll enter the repayment term, which can last anywhere from one to 15 years. During this time, you'll make regular fixed payments on the loan, paying back the principal plus interest.
Types of home improvement loans
There are several kinds of loans you can use to make home improvements. The most common are:
- Personal loans: These unsecured loans, which are featured on this page, can be used for any reason. Interest rates are based on your credit score, and you don’t have to provide collateral. This may be a good option if you want to avoid using your home to secure a loan.
- Home equity loans: These are lump-sum loans that are often used for home-related projects and needs. Your home is used to secure the home equity loan. Because of this, you can usually expect a lower interest rate than with a personal loan, but if you miss payments, your home could face foreclosure.
- Home equity line of credit (HELOC): A HELOC is a revolving line of credit secured by the equity in your home. You can take money out for home-related expenses as needed, rather than as a lump sum. Your home is used as collateral for a HELOC, and you’ll score lower interest rates because of it.
Common reasons to use a home improvement loan
A home improvement loan is flexible. You can use it to cover the cost of just about any project that will improve your home or repair any problems that exist. Some examples of common projects include:
- Kitchen remodels.
- Deck or patio additions.
- Bathroom remodels.
- Roof replacements.
- Home additions.
- Flooring upgrades.
- Window replacements.
Pros and cons of home improvement loans
Pros:
- Most home improvement loans are unsecured, so you won’t lose your home if you default on your loan.
- the same day you’re approved or a few days after.
- Since home improvement loans come with fixed interest rates, you can enjoy predictable payments.
Cons:
- You may be on the hook for fees such as origination fees and late fees. This can increase the overall cost of your loan.
- Some home improvement loans have high APRs, which may cost you thousands of dollars in interest.
- If you borrow more than you can afford, you risk steering yourself into a cycle of debt.
Best home improvement loans in June 2021
To find the best home improvement loans, we combed through interest rates, repayment timelines and fees. Here are the best home renovation loans to consider in 2021, along with loan details and profiles of borrowers they best fit:
- LightStream: Best lender for long-term financing
- SoFi: Best lender for unemployment protection
- Marcus by Goldman Sachs: Best lender for minor home improvement projects
- TD Bank: Best lender for convenience
- LendingClub: Best lender for emergency home repairs
- Best Egg: Best lender for consumers with little credit history
- Upstart: Best lender for consumers with below-average credit
- Prosper: Best lender for online-only experience
LightStream: Best lender for long-term financing
Why LightStream is the best for long-term financing: The online lending arm of Truist (formerly SunTrust Bank) offers terms as long as 12 years for home improvement loans.
Overview: The lender’s unsecured personal loans are big enough for major home projects and come with competitive rates for qualified borrowers.
Perks: You can borrow up to $100,000 at a very competitive rate if your credit is excellent. There are no fees or penalties for paying the loan off early.
What to watch out for: LightStream requires good to excellent credit. Rates without autopay are 0.5 percentage points higher, and you must borrow at least $5,000.
| LightStream |
| 4.6 / 5.0 |
| Not specified |
| 3.99%–16.99% (with autopay) |
| $5,000–$100,000 |
| 2 to 12 years |
| Not specified |
| None |
Read Bankrate's expert LightStream Review.
SoFi: Best lender for unemployment protection
Why SoFi is the best for unemployment protection: SoFi’s Unemployment Protection Program temporarily pauses your payments if you lose your job.
Overview: SoFi, an online-only lender, offers personal loans for home improvements ranging from $5,000 to $100,000.
Perks: Repayment terms stretch from two to seven years, and the loans do not have origination fees or prepayment penalties.
What to watch out for: Good to excellent credit is required. SoFi loans are also not available in Mississippi, and minimum loan amounts may be higher in some states — so check the terms for your state to make sure you won't have to borrow more than you need.
| SoFi |
| 4.6 / 5.0 |
| 680 |
| 5.99%–18.28% (with autopay) |
| $5,000–$100,000 |
| 2 to 7 years |
| Not specified |
| None |
Read Bankrate's expert SoFi Review.
Why Marcus by Goldman Sachs is the best for minor home improvements: You can borrow as little as $3,500, which is good for minor fixes around the house.
Overview: Marcus by Goldman Sachs is an online lender that offers unsecured personal loans for home improvements. You do not have to have a relationship with Goldman Sachs to apply.
Perks: There are no late fees or prepayment fees, and the lender has an app for mobile banking.
What to watch for: If your credit is weak, you may not qualify for a loan.
| Marcus by Goldman Sachs |
| 4.8 / 5.0 |
| Not specified |
| 6.99%–19.99% (with autopay) |
| $3,500–$40,000 |
| 3 to 6 years |
| Not specified |
| None |
Read Bankrate's expert Marcus by Goldman Sachs Review.
TD Bank: Best lender for convenience
Why TD Bank is the best for convenience: The bank's in-person presence is a nice touch if you would like individual assistance.
Overview: For borrowers who want a brick-and-mortar lender, TD Bank has more than 1,200 locations on the East Coast, which are open on weekends. It also offers mobile banking to consumers nationwide.
Perks: TD Bank's unsecured personal loan is available in as little as one business day.
What to watch for: TD Bank charges a late fee of 5 percent or $10, whichever is less, and the rate cap is also fairly high at 21.99 percent. Additionally, TD Bank's personal loans are only available to residents of Connecticut, Delaware, Florida, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia and Washington, D.C.
| TD Bank |
| 4.9 / 5.0 |
| Not specified |
| 6.99%–21.99% |
| $2,000–$50,000 |
| 3 to 5 years |
| Not specified |
| Late fee: 5% or $10, whichever is less |
Read Bankrate's expert TD Bank Review.
LendingClub: Best lender for emergency home repairs
Why LendingClub is the best for emergency home repairs: LendingClub lets you borrow as little as $1,000, which is convenient if the hot water heater or clothes dryer conks out and you’re short of cash.
Overview: LendingClub is a peer-to-peer lender that offers loans of up to $40,000 for home improvement projects. You can apply online and get a loan quote without a hard pull on your credit report.
Perks: LendingClub allows joint applicants, which makes it easier for people with below-average credit to be approved.
What to watch for: There is an origination fee of 3 percent to 6 percent of the loan amount, and the late payment fee is the greater of 5 percent or $15. The APRs for borrowers with poor credit are also on the high side, hitting close to 36 percent if your credit is bad.
| LendingClub |
| 4.3 / 5.0 |
| 600 |
| 8.05%–35.89% |
| $1,000–$40,000 |
| 3 or 5 years |
| Not specified |
| Origination fee: 3% to 6%; Late fee: 5% or $15 |
Read Bankrate's expert LendingClub Review.
Best Egg: Best lender for consumers with little credit history
Why Best Egg is the best for consumers with little credit history: Borrowers with little credit experience and a FICO credit score of just 600 may be able to qualify for a home improvement loan with Best Egg.
Overview: Best Egg home improvement loans allow you to finance big expenses like building a new deck, replacing your garage door and remodeling your kitchen.
Perks: You can borrow as little as $2,000 or as much as $35,000. Borrowers with great credit can get rates starting as low as 5.99 percent, and there is no penalty for paying the loan off early.
What to watch for: Best Egg charges origination fees of 0.99 percent to 6.99 percent, and there is a $15 fee for payments more than three days late — a relatively short grace period compared to other companies.
| Best Egg |
| 4.6 / 5.0 |
| 600 |
| 5.99%–29.99% |
| $2,000–$50,000 |
| 3 to 5 years |
| Not specified |
| Origination fee: 0.99% to 6.99%; Late fee: $15; Returned payment fee: $15 |
Read Bankrate's expert Best Egg Review.
Upstart: Best lender for consumers with below-average credit
Why Upstart is the best for consumers with below-average credit: Consumers with tainted credit still might be able to qualify for unsecured home improvement loans with Upstart, a peer-to-peer lender.
Overview: Upstart home improvement loans allow you to finance home improvement projects like home renovations or unexpected home expenses, such as a roof repair.
Perks: There’s no penalty for paying the loan off early. Loan amounts start as small as $1,000, and you can get your loan funds in as little as one business day.
What to watch for: Loans cannot have co-signers, and there is a late fee of 5 percent or $15, whichever is greater.
| Upstart |
| 4.5 / 5.0 |
| 600 |
| 8.94%–35.99% |
| $1,000–$50,000 |
| 3 or 5 years |
| Not specified |
| Origination fee: 0% to 8%; Late fee: greater of 5% of unpaid balance or $15; Returned check fee: $15; One-time paper copies fee: $10 |
Read Bankrate's expert Upstart Review.
Prosper: Best lender for an online-only experience
Why Prosper is the best for an online-only experience: The paperless application process is quick, and borrowers receive their funds within three business days on average.
Overview: Prosper was founded in 2005 and is a pioneer in the digital lending marketplace. It is a peer-to-peer lender, which matches investors with borrowers. Prosper offers fixed-rate unsecured personal loans to borrowers with fair to excellent credit. Prosper’s home remodeling loans let you make renovations like building an outdoor deck or a room addition.
Perks: There are no penalties for paying your loan balance off early, and the initial application process will result in a soft pull on your credit, which won’t hurt your score.
What to watch for: Prosper charges origination fees of 2.41 percent to 5 percent and late fees of 5 percent or $15, whichever is greater. If your credit is poor, you may have to find another lender, as Prosper's credit threshold is 640.
| Prosper |
| 4.4 / 5.0 |
| 640 |
| 7.95%–35.99% |
| $2,000–$40,000 |
| 3 or 5 years |
| Not specified |
| Origination fee: 2.41% to 5%; Late fee: $15 or 5%; Check fee: $5 or 5%; Insufficient funds fee: $15 |
Read Bankrate's expert Prosper Review.
How to find the best home improvement loan rates
To land the best home improvement rate, you can:
- Shop around: Not all lenders are created equal. Do your research and compare lenders so you can choose the ideal option for your budget and credit.
- Get prequalified: See if you prequalify for a loan with various lenders. This way, you can easily compare rates and terms.
- Get a co-signer: If you have less than stellar credit, a co-signer may make sense. They can help you secure a loan with an interest rate that you may not qualify for on your own.
- Improve your credit score: A higher credit score can lead to a lower rate. If your score is on the low side, work to improve it before you apply for a loan.
- Choose a shorter loan term: Generally speaking, the shorter loan term you choose, the lower rate you’ll receive. If you do go with a shorter term, make sure you can afford the monthly payments.
Frequently asked questions about home improvement loans
Can a home improvement loan increase my home's value?
Doing home improvement projects makes it less likely that 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 Remodeling's most recent Cost vs. Value Report, include the following:
- Garage door replacement (93.8 percent of cost recouped).
- New manufactured stone veneer (92.1 percent of cost recouped).
- Minor kitchen remodel with midrange finishes (72.2 percent of cost recouped).
Are home improvement loans tax deductible?
Personal loans for home improvement are not tax deductible because they're not secured by your home. Home equity loans and home equity lines of credit, on the other hand, use your home as collateral for the loan. Because of this, you may be able to deduct the interest paid on a home equity loan or HELOC if the funds were used to "buy, build or substantially improve" the home that was used as collateral.
How much can you borrow with a home improvement loan?
Because home improvements do not use your home as collateral, you're typically not limited by the amount of equity you have in your home — the amount you can borrow is instead determined by the individual lender. Most lenders offer loan amounts from $1,000 to $50,000, though some let you borrow much more.
Can I borrow more on my mortgage for home improvement?
While it's not possible to add on to your existing mortgage, you can borrow money for home improvements through what's known as a cash-out refinance. With a cash-out refinance, you'll take out a new mortgage for a greater amount than what you currently owe. You'll then receive the difference in cash, which can be put toward home improvements. Because you'll be taking out an entirely new mortgage with new terms and a new interest rate, a cash-out refinance is only a wise move if you can get a better interest rate than what you're paying on your current mortgage.
