As a homeowner, you can almost always find something on your property that needs fixing up or updating.
Whether you’re facing an emergency home repair or a planned home improvement, covering the costs can require stacks of cash you may not have. If you can’t pay for home improvement expenses out of pocket, you may need to borrow those funds instead. That’s where home improvement loans come in.
If you’re hoping to get the money you need to upgrade your home, check out our picks for the best home improvement loans.
The best home improvement loans
Best for long repayment terms: Lightstream
Lightstream offers a maximum loan amount of $100,000, which makes it a good fit if you have a larger home improvement project. There is also a minimum loan amount of $5,000, which is important to keep in mind as you’re thinking about project costs.
Lightstream is known for its low annual percentage rates (APRs) and no-fee loans. Additionally, Lightstream allows repayment terms of up to 20 years for home improvement loans, which is a longer repayment term than what you might get with many other lenders. You do need good credit to qualify for Lightstream, as the company looks closely at your credit history and available assets.
Read our Lightstream loans review.
Best for no-fee home improvement loans: SoFi
SoFi offers an easy online loan application process and charges no fees for its loans. You can borrow between $5,000 and $100,000 for home improvements with SoFi, also making it an attractive option for those who need larger loans to remodel.
Although SoFi is one of the few lenders that offer up to $100,000, its longest repayment term is seven years, and its rates are higher than what you might find with a lender like Lightstream. However, SoFi is known for offering rate discounts with AutoPay and for offering membership benefits that include career coaching, financial planning help, and a variety of special tools and events.
Read our SoFi loans review.
Best for limited or fair credit: Upgrade
Upgrade offers home improvement loans of between $1,000 and $50,000 for those who have less-than-perfect credit. Although the company doesn’t list a minimum credit score, some websites suggest that you can get a loan with Upgrade if you have a credit score of at least 620. Just keep in mind that you probably won’t qualify for the lowest rates with a low credit score.
Upgrade offers three-year and five-year loan terms, and it allows you to choose an option that fits your budget. If you have limited credit and need a loan, Upgrade could potentially be a good choice to help you get the funds you need for an upcoming project.
Read our Upgrade loans review.
Best for peer-to-peer lending: Prosper
Prosper can be a good fit for someone who wants access to peer-to-peer lending with relatively fast funding. Prosper offers loans of between $2,000 and $50,000 and loan terms of three to five years.
You can expect an origination fee with Prosper, but there are no prepayment penalties and you can pay off your loan at your own pace, choosing a term that works for you. Prosper also offers secured home equity lines of credit with low rates, if you qualify.
Read our Prosper loan review.
Best for ongoing home renovations: Figure and Hometap
If you’re interested in a home equity line of credit (HELOC) instead of a lump-sum home improvement loan, Figure 2 could be a good option for your upcoming home project. This lender offers up to $250,000 for renovations, and borrowers can choose terms of between five and 30 years.
Figure could potentially be a good option for ongoing renovations because it’s a line of credit, not a lump-sum loan, so you could borrow as you go, only tapping into your credit line when you need to do so. This might offer more flexibility if you are unsure about project costs.
Read our Figure loan review.
Hometap is another option that allows you to access the equity in your home to pay for ongoing renovations. Their model is a little different than a traditional HELOC, though. Instead of taking on debt, you get money upfront from investors, who are essentially investing in the future equity of your home. Because a Hometap investment is different from a traditional HELOC, there are no monthly payments to worry about, and you can repay the investors anytime within a 10-year term.
A loan through Hometap could potentially work well if you’re doing ongoing renovations and interested in selling your house in the near future. Just keep in mind that Hometap investors will get a share in the future value of your home.
Read our Hometap review.
The best home improvement loan comparison sites
If you want to compare multiple offers for the best home improvement loans, using an aggregation website might be a good way to move forward. Loan comparison sites ask you to fill out one form with your information and then provide you with several loan options from various lenders that you might qualify for. Comparing loans typically does not impact your credit score, though you’ll likely see a hard inquiry on your credit report once you apply for a loan.
The comparison site will typically earn a commission if you get approved for a loan, but it doesn’t usually cost you extra, and you can easily compare different offers before choosing one.
With AmOne, you simply fill out a form with some basic information and you’re matched with loan offers you’re likely to qualify for. AmOne offers you the ability to talk to a human to help you find the right match for you. AmOne has partners that offer secured, unsecured, and peer-to-peer loans. Loan amounts range from $1,000 to $50,000.
Read our AmOne review.
Fiona offers to match you with an appropriate loan from its network of lenders when you fill out its simple form. Fiona also has educational articles on its site that can help you use your loan more effectively. Loan amounts range from $1,000 to $250,000.
Read our Fiona review.
LoansUnder36 1 offers access to a network of lenders offering small-dollar loans (starting at $100), which can make it one of the best home improvement loans if you need money for a small project or emergency home repair. However, you can also borrow up to $35,000 if needed. If you have fair to poor credit, LoansUnder36 could potentially help you find a loan that works for your situation, and it won’t result in a hard inquiry on your credit report unless you apply for a loan.
Read our LoansUnder36 review.
The 5 types of home improvement loans
Home improvement loans aren’t one specific credit product like, say, a mortgage. Instead, there are five main loans that homeowners typically seek to finance home improvements: a personal loan, home equity loan, home equity line of credit, a government-backed loan, or a cash-out refinance.
Personal loans are a form of unsecured debt that can be used to borrow as little as $1,000 up to $50,000 or more. Because the personal loan is unsecured, you won’t need to offer collateral (such as equity in your home) to qualify.
Although it’s possible to find an unsecured personal loan if you have poor credit, you’ll likely pay a higher interest rate without good to excellent credit. Once you’re approved for a personal loan and sign on the dotted line, your lender will disburse the loan funds to you, sometimes within one or a few business days. After that, you’ll repay the personal loan in monthly installments with payments based on your loan amount, term, and interest rate.
Home equity loans
Home equity loans are another common option to fund home improvements. These secured loans use a portion of your home equity as collateral to fund the loan. This means you’ll need to have adequate home equity against which you can borrow.
If you do have sufficient equity in your home, a home equity loan can be an accessible and affordable way to borrow. Home equity loans often carry lower rates than other home improvement loan options. (Note, however, the added risk to the borrower — should you become unable to keep up with home equity loan payments, you could lose your home.)
The process of applying is typically lengthier and more involved for a home equity loan vs. a personal loan. It's similar to getting a second mortgage because you might need to complete additional steps to prove your home’s value and your equity, such as scheduling real estate appraisals or home inspections. Once you’re approved, funds are disbursed to you and you’ll repay the home equity loan in installments.
Home equity line of credit
There’s also a home equity line of credit (HELOC). This option is similar to a home equity loan because it relies on home equity to secure any money you borrow. This means the requirements, rates, and process of applying for a HELOC are similar to those of a home equity loan.
The big difference comes in the loan funding portion of the transaction. Instead of receiving a lump sum as you would with a home equity loan, you’ll get a home equity line of credit. This is a type of revolving credit, similar to a credit card, that you can borrow from and repay as needed during a set time, known as a draw period. You’ll make minimum payments during the draw period. Once it ends, you’ll enter a repayment period to pay back the remaining balance.
Government-backed home improvement loans
Finally, some homeowners might qualify for an FHA Title I property improvement loan for repairs required to make the home livable or useful. Plus, many state and local programs provide financial assistance to homeowners for repairs and improvements. Research your options to be sure you’re not missing any potential assistance to help you with your home.
Another less common option is a cash-out refinance. When you refinance a current mortgage, you replace the existing loan with a new loan. If you have enough equity in your home, it’s possible to get a refinance for more than you owe and then receive a portion of the difference in cash.
However, the refinancing process can often take much longer and be more involved than getting a home improvement loan because you’re getting a new mortgage. Additionally, you’ll likely need to pay closing costs, which could make a cash-out refinance more expensive. Still, this might be a good option if you want to make home improvements and are already planning to refinance an existing mortgage to take advantage of low mortgage rates.
How to choose the right home improvement loan
Now that you know your options, how do you choose the best home improvement loan for you? Here are some factors to weigh that can help you home in on the home improvement loan that best fits your needs.
- How much you need to borrow: Once you know how much you need, you can compare that amount to the loan limits of different lenders and loan types. If you’re unsure how much you might need to borrow or have ongoing financing needs, a home equity line of credit can be a good fit.
- How much home equity you have: This determines whether you can get a home equity loan or HELOC, and how much you can borrow.
- How willing you are to leverage your home: Taking out a home equity loan or HELOC uses your house as collateral, and you’ll need to weigh the risks and rewards of this option.
- How fast you need the funds: A personal loan will offer a much faster approval and funding process than either a home equity loan or line of credit or a government-backed loan.
- How good your credit is: Most home improvement loans will require a decent credit score to qualify, though some government-backed loans might offer more flexibility. Your credit score also affects the interest rate and potential fees you will face. If you have poor credit, considering a lender that lets you add a co-signer or co-borrower to your loan application might provide you with more options.
- How much you’ll pay: Home equity loans and HELOCs often provide lower interest rates than personal loans but can come with additional closing fees. Get rate quotes for different credit options to compare costs and terms. A fixed interest rate might be a better option than a variable rate loan because your payments will stay consistent.
- How you want to repay what you borrow: If you want flexible monthly payments, a HELOC could be the option for you. Home equity loans and personal loans give you predictable monthly costs.
- How long a loan term you’re comfortable with: Personal loans often come with shorter terms, usually between three and five years, though there are some lenders that offer terms of seven to 12 years. If you’re comfortable with a longer term, totaling up to 15 or 30 years, a home equity loan or line of credit might be a good choice, if you qualify. Generally, the longer the term, the smaller your monthly payments; however, it's important to keep in mind that you'll generally pay more interest over the life of the loan if you choose a longer term.
The companies we chose for our list of the best home improvement loans are current or past FinanceBuzz partners. We did not review all companies in the market. We used editorial judgment to determine what use or user each home improvement loan would be best for.
FinanceBuzz evaluation criteria include:
- Loan amounts: Loan size options, including higher amounts and lower amounts to provide a range of choices.
- Fees: A variety of fees were considered when creating this list, including origination fees and prepayment penalties.
- Types of loans offered: We wanted to include lenders that offer secured, as well as unsecured, loans.
- Loan term lengths: Home improvement loans were evaluated based on how long you could repay your loan, as well as the ability to choose loan terms that fit your needs.
- Funding speed: How fast you can potentially get your funds takes a look at when you’ll have access to the money.
What type of loan is best for home improvement?
The best home improvement loan for you will be determined by your specific situation, credit qualifications, and needs. If you want to minimize borrowing costs, a home equity loan might be the way to go. But if you don’t have much equity to borrow against or need to get funds faster, a personal loan could be a better fit.
What is the best place to get a home improvement loan?
The best place to get a home improvement loan is one where you can get the best terms and rates for your situation. Banks, credit unions, online lenders, and loan marketplaces all offer access to home improvement loans. Shop around and compare terms to find the best option for you.
Are home improvement loans tax-deductible?
The interest paid on home loans secured by your property’s value is often tax-deductible, including home equity loans or HELOCs. The IRS requires that loan funds must be used to buy, build, or improve the home they secure for interest to be deductible. You can write off interest on up to $750,000 in qualifying residential loans.
Interest paid on personal loans is not tax-deductible.
What is the interest rate on a home improvement loan?
The rate you’ll pay depends on a few factors. The type of loan you choose plays a big role, with home equity loans and HELOCs offering lower rates. Your creditworthiness and debt-to-income ratio will also likely factor into your home improvement loan rate; the better your credit, the lower your rates.
What credit score is needed for a home improvement loan?
You’ll likely need good credit or better to get a home equity loan or HELOC. Most (but not all) lenders require a FICO credit score of at least 680, according to Experian. And you’ll likely need a score of 700 or higher to qualify for better rates and terms. Credit score requirements for personal loans can vary greatly, depending on the lender you choose.
Are there fees associated with home improvement loans?
Depending on the lender or loan that you get, there may be fees associated with a home improvement loan. For instance, you might pay a loan origination fee or a late fee if you miss a monthly payment. If you have concerns about fees, it's a good idea to talk with potential lenders before you sign on the dotted line.
If you’re ready to get home repairs or improvements underway, start looking for the right financing option. Choosing the best home improvement loan is the first and one of the most important decisions you’ll make in your home improvement process.
Make sure you pick the type of home improvement loan that best meets your needs. Once you know what you want, shop around to find the best lender, terms, and competitive rates available to you.
Disclaimer: All rates and fees are accurate as of April 2021.