Best Home Improvement Loans for 2020

Bankrate's guide to choosing the best home improvement loans

By: Elizabeth Wells

As of Sunday, May 31, 2020

Few homeowners could remodel their kitchen, build a backyard swimming pool or replace the roof without borrowing the money to pay for it. Unsecured personal loans are popular for home projects because they allow people to upgrade their properties without using their home as collateral or spending emergency funds or retirement savings to cover the cost. All the lenders listed here offer a fast, paperless application and approval process. If approved, you can get the loan money within days.

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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 loans rates in June 2020

Lender
APR
Max. Loan Amount
Min. Loan Amount
LightStream
4.99%-14.99% (with autopay)
$5,000
$100,000
SoFi
5.99% - 18.64% (with autopay)
$5,000
$100,000
Marcus by Goldman Sachs
6.99%-28.99% (with autopay)
$3,500
$40,000
TD Bank
4.67%-18.99% (with autopay)
$2,000
$50,000
LendingClub
10.68%-38.89%
$1,000
$40,000
Best Egg
5.99%-29.99%
$2,000
$35,000
Upstart
6.18%-35.99%
$5,000
$30,000
Prosper
7.95%-35.99%
$2,000
$40,000

Average home improvement loan rates

Average home improvement loan rates currently range from 5.99 percent to around 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 2020

What is a home improvement loan?

A “home improvement loan” is usually an unsecured personal loan that pays 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.

Types of home improvement loans

  • Personal loans: These unsecured loans, which we reviewed in our lender recommendations above, can be used for any reason. Interest rates are based on your credit score, but you don’t put anything up as 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. You can take money out for home-related expenses as needed, rather than a lump sum. Your home is still used as collateral for a HELOC, and you’ll score lower interest rates because of it.

Best personal loans for home improvement

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

  • LightStream: Best lender for long-term financing loans
  • SoFi: Best lender for all home improvement loans
  • 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 loans

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 seven 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 off the loan early.

What to watch out for: LightStream requires good to excellent credit. Rates without AutoPay are 0.5 percent higher. You must borrow at least $5,000.

Lender LightStream
Bankrate Rating 4.6 / 5.0
Min. Credit Score 660
Est. APR 4.99% - 14.99% (with autopay)
Loan Amount $5,000 - $100,000
Term Lengths 2 years to 12 years
Min. Annual Income None
Fees None/td>

Read Bankrate's expert LightStream Review.

SoFi: Best lender for all home improvement loans

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. SoFi loans do not have origination fees or prepayment penalties. SoFi also has an “Unemployment Protection Program” that temporarily pauses your payments if you lose your job.

What to watch out for: good to excellent credit is required.

Lender SoFi
Bankrate Rating 4.7 / 5.0
Min. Credit Score 680
Est. APR 5.99% - 18.64% (with autopay)
Loan Amount $5,000 - $100,000
Term Lengths 2 years to 7 years
Min. Annual Income None
Fees None

Read Bankrate's expert SoFi Review.

Marcus by Goldman Sachs: Best lender for minor home improvements

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. It can take up to five days to receive the loan money.

Lender Marcus by Goldman Sachs
Bankrate Rating 4.8 / 5.0
Min. Credit Score 660
Est. APR 6.99% - 28.99% (with autopay)
Loan Amount $3,500 - $40,000
Term Lengths 3 years to 6 years
Min. Annual Income None
Fees 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 has three different personal loan products to choose from based on your needs: the TD Express Loan, which makes funds available in as little as 48 hours, the Unsecured Loan, which lets you borrow up to $50,000, and the Secured Loan, which offers a lower interest rate.

What to watch for: TD Bank's unsecured loan products charge late fees of 5 percent or $10, whichever is less, and its secured loan charges an origination fee of $50. You'll also need to have excellent credit to apply for its unsecured loans — a minimum credit score of 700.

Lender TD Bank
Bankrate Rating 4.2 / 5.0
Min. Credit Score 700 for unsecured loans
Est. APR 5.67% - 18.99% (with autopay)
Loan Amount $2,000 - $50,000
Term Lengths 1 year to 5 years
Min. Annual Income None
Fees Late fee of 5% or $10 for unsecured loans, origination fee of $50 for secured loans

LendingClub: Best lender for emergency home repairs

Overview: LendingClub is a peer-to-peer lender that offers loans 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 co-signers and joint applicants, which makes it easier for people with below-average credit.

What to watch for: There is an origination fee of 21 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.

Lender LendingClub
Bankrate Rating 4.5 / 5.0
Min. Credit Score 600
Est. APR 10.68% - 35.89%
Loan Amount $1,000 - $40,000
Term Lengths 3 years or 5 years
Min. Annual Income None
Fees Origination fee: 2% to 6% of loan amount. 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 640 may be able to qualify for a home improvement loan with Best Egg. However, if you have a bankruptcy or tax lien if you are working with a credit counselor or debt management company, you are ineligible for a loan. 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 5.99 percent and there is a $15 fee for late payments.

Lender Best Egg
Bankrate Rating 4.7 / 5.0
Min. Credit Score 640
Est. APR 5.99% - 29.99%
Loan Amount $2,000 - $35,000
Term Lengths 3 years or 5 years
Min. Annual Income None
Fees Origination fee: 0.99% to 5.99% of loan amount. Late fee: $15

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 an unsecured home improvement loan 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 off the loan early. Loan amounts start as small as $5,000 and you can get your loan funds in just 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 less.

Lender Upstart
Bankrate Rating 3.8 / 5.0
Min. Credit Score 620
Est. APR 6.18% - 35.99%
Loan Amount $5,000 - $30,000
Term Lengths 3 years or 5 years
Min. Annual Income None
Fees Late fee of 5% of unpaid balance or $15

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 good to excellent credit. Prosper’s home improvement loans let you make repairs such as building an outdoor deck or room addition.

Perks: There are no penalties for paying off your loan balance 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 five 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 not good, you may have to find another lender.

Lender Prosper
Bankrate Rating 4.6 / 5.0
Min. Credit Score 640
Est. APR 7.95% - 35.99%
Loan Amount $2,000 - $40,000
Term Lengths 3 years or 5 years
Min. Annual Income None
Fees Origination fee: 2.4% to 5%. Late fee: $15 or 5%. Check fee: $5 or 5%

Read Bankrate's expert Prosper Review.

What you need to know about home improvement loans

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

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. Some benefits of home improvement loans include:

  • Unsecured options: 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.
  • Shorter repayment periods: Home improvement loans are generally repaid over a few years, depending on the lender. In contrast, home equity loans and HELOCs 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 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.
  • Lower closing costs: Closing costs on equity loans can reach thousands of dollars, but many personal loans have no origination fees.

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 2020 Cost vs. Value Report, include the following:

  • Garage door replacement (94.5 percent cost recouped).
  • New manufactured stone veneer (95.6 cost recouped).
  • Minor to mid-range kitchen remodel (77.6 percent cost recouped).

Home improvement loan uses

Home improvement loans are personal loans, which means they can be used for almost any purpose. This means you can use your home improvement loan for:

  • Roof repairs: Roof replacements might be one of the most costly repairs your home will face. If you don’t have the cash on hand to pay for roof repairs, you may need to take out a home improvement loan.
  • Kitchen remodeling: Whether your kitchen is outdated or just needs a little facelift, a home improvement loan can help make your new kitchen vision a reality.
  • Bathroom renovations: If you need to make major changes to your bathroom or fix outdated plumbing, a home improvement loan can cover costs right away.
  • New pool: If you’re looking to add a pool or update the one you have, a home improvement loan can pay for it now, giving your home an instant equity boost.

How 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 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 amount: 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. Make sure you 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 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.

Alternatives to home improvement loans

If you don’t qualify for a home improvement loan or you can’t find one that’s right for you, consider alternatives like:

  • Cash-out refinancing: Cash-out refinancing replaces your current mortgage with a new one that’s higher than the amount you owe. You pocket (or “cash-out”) the difference between the two loans.
  • Credit cards: If you don’t have a major home expense and just need to cover a few minor improvements, a credit card might be a good idea. For one thing, you may be able to take advantage of cash back or a low introductory APR. However, make sure you have a plan in place to pay back your balance in a timely manner; otherwise you’ll face interest rates that are much higher than those of most home improvement loans.
  • Federal programs: If you have specific improvements in mind, try energy efficient loans or Title I property improvement loans. A Title I property improvement loan is when the Department of Housing and Urban Development matches you up with private insurers to help pay for home improvements.

No matter what option you go with, research multiple lenders and offers before choosing the best one for you.