What you need to know about home improvement loans
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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 April 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?
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 at traditional banks, credit unions, online lenders and peer-to-peer lenders.
How does it work?
When you're approved for a home improvement loan, you receive all funds upfront, 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 different 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.
Best for: This option works best for borrowers who want to tackle small to large home improvement projects and want to avoid using their homes as collateral. In addition, it works best for borrowers who can afford to repay the loan in a shorter time frame — home improvement loan lenders typically have terms ranging from two to 12 years.
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.
Best for: This option is best for borrowers who know how much their home improvement projects will cost, since the funds are issued up front as a lump sum. In addition, you should have enough equity in your home to apply — most lenders require you to have at least 15 percent to 20 percent equity in your home.
Home equity line of credit (HELOC)
A HELOC is a revolving line of credit. You can take money out for home-related expenses as needed, rather than as a lump sum. Your home is still used as collateral for a HELOC, and you’ll score lower interest rates because of it.
Best for: HELOCs might be the best option if you need to borrow money for improvements that are difficult to estimate, since you can borrow money on an as-needed basis. Also, this option works best for people who have enough equity in their homes to meet the lender’s borrowing requirements.
The best type of loan for home improvements depends on your risk tolerance and the size of your project. While not without risk, a personal loan isn't backed by your home. However, a HELOC could be a better choice if you have many home improvements planned over a number of years — and you may be able to deduct the interest you pay from your taxes.
What can you use a home improvement loan for?
Home improvement loans are personal loans, which means they can be used for almost any type of project, from replacing a hot water heater or air conditioner to renovating a kitchen. Some of the major improvements you can use your home improvement loan for include:
| Home improvement project
|
Estimated cost
|
| Roof repairs |
$5,402–$11,083 |
| Kitchen remodeling |
$13,333–$37,681 |
| Bathroom renovations |
$6,132–$15,396 |
| New inground pool |
$36,933–$66,506 |
Source: HomeAdvisor
Best home improvement loans in April 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
Overview: The online lending arm of Truist (formerly SunTrust Bank) offers unsecured personal loans big enough for major home projects with competitive rates and up to 12 years to repay, if you qualify.
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
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. SoFi also has its Unemployment Protection Program, which temporarily pauses your payments if you lose your job.
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.
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: You can borrow as little as $3,500, which is good for minor fixes around the house. 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
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, and the bank's in-person presence is a nice touch if you would like individual assistance.
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
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 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. LendingClub also 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
Overview: 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. 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 off the loan 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. However, due to the coronavirus pandemic, that late fee is currently being waived, according to a customer service representative.
| 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 (currently suspended); Returned payment fee: $15 (currently suspended) |
Read Bankrate's expert Best Egg Review.
Upstart: Best lender for consumers with below-average credit
Overview: Consumers with tainted credit still might be able to qualify for unsecured home improvement loans with Upstart, a peer-to-peer lender. 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
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. The paperless application process is quick, and borrowers receive their funds within three business days on average.
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.
FAQ about home improvement loans
How is a home improvement loan different from a home equity loan and HELOC?
The biggest difference between a personal loan for home improvements and a home equity loan or line of credit (HELOC) is that the personal loan is unsecured. Home equity borrowers have to use their homes as collateral, which means that the interest rate on a home equity loan tends to be lower.
To figure out which option is best for you, make sure you know the differences between a home improvement (personal) loan, a home equity loan and a HELOC.
What are some benefits of home improvement loans?
- Unsecured options: Unlike home equity loans and HELOCs, home improvement loans don't require you 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.
- Shorter repayment periods: Home improvement loans are generally repaid over a few years, depending on the lender. In contrast, home equity loans and HELOCs typically have repayment options of up to 20 years.
- Flexibility: The loan amount is not limited by how much equity you have in your home. You can apply for as little or as much money as you need.
Lower closing costs: Closing costs on home equity loans can reach thousands of dollars, but many personal loans have no origination fees.
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:
- New manufactured stone veneer (95.6 percent of cost recouped).
- Garage door replacement (94.5 percent of cost recouped).
- Minor kitchen remodel with midrange finishes (77.6 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.
How to find 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 best home improvement lenders have:
- The lowest rates: Look for lenders that offer the lowest home improvement loan interest rates. Even if your credit score isn’t stellar, look for lenders with a low maximum rate. While borrowers with excellent credit will get the lowest rate, you still want to make sure you aren’t paying more than you need to.
- The largest loan amounts: How much can you borrow? If you’re tackling a large renovation, like a new roof, you might need to borrow a significant amount of money. Find a lender that offers as much as you need.
- The fewest fees: Sometimes lenders charge an origination fee, a late fee or miscellaneous fees on top of your principal and interest payments. Factor in fees when considering a lender's offer.
- The easiest repayment terms: See how long it’ll take you to repay your loan. Longer repayment periods will lower your monthly payments, which is especially important for borrowers seeking large loans. Some lenders have terms as long as seven or even 12 years, depending on how much you borrow.
