Top Home Improvement Personal Loan Providers
What is a Home Improvement Loan?
A home improvement loan is an unsecured personal loan created to finance renovations, repairs, or enhancements to a residential property. A home improvement loan can help homeowners renovate a kitchen or add an extension, upgrade plumbing or electrical systems, or make energy-efficient improvements. Lenders offer loans up to $100,000. Home improvement loans are usually lump sums that are repaid in monthly installments over a period of two to twelve years.
Home Improvement Loans: Key Terms to Know
- APR: The annual percentage rate, which is the total cost of the loan expressed as a percentage of the amount borrowed.
- Loan term: The length of time it takes to repay the loan.
- Loan amount: The maximum amount of money that can be borrowed.
- Collateral: An asset that is pledged to the lender in case the borrower defaults on the loan.
- HELOC: A home equity line of credit, which is a revolving line of credit that uses the borrower's home equity as collateral.
Home Improvement Loan: How it Works
To get a home improvement loan, you will need to provide the lender with some information, such as your income, your credit score, and the purpose of the loan. The lender will then decide whether to approve your loan and what interest rate to offer you. Once your loan is approved, you will receive the money in a lump sum. You will then use the money to pay for your home improvement project and start making monthly payments to the lender once the loan funds are disbursed. The terms of your home improvement loan will vary depending on the lender and the type of loan you choose. However, most home improvement loans have a repayment term of 5 to 15 years.
Home Improvement Loan APRs
APRs on home improvement can range from 4.60% up to 35.99%. The interest rate charged depends on many factors, and different home improvement loan providers charge different rates. Bear in mind that the following items will be key in determining what APR you are charged:
- Credit history – high credit scores mean lower APRs
- Income history – higher income means lower APRs
- The amount borrowed – a lower amount means lower APRs
Home improvement loans tend to be short to medium-term in length. If you are looking to borrow a large amount of money, a different loan type may be more suitable. The average kitchen and bathroom remodel costs north of $20,000, so it’s best to consider all your options before settling on a home improvement loan.
Home Improvement Loans Pros and Cons
Who Can Get a Home Improvement Loan?
The requirements for who can get a home improvement loan vary depending on the lender. However, you can expect to provide the following information during the application process:
- Proof of income and employment
- Proof of ID
- Proof of address
After the lender has reviewed your information, it will decide whether to approve your application. Most online applications for home improvement loans are processed instantly.
How to Get a Home Improvement Loan?
Getting a home improvement loan typically involves several steps. It is easy to apply for a home improvement loan. If you think getting a home improvement loan is the best choice for you, just follow the process outlined below.
- Determine your home improvement needs: Assess the scope of the project and calculate the estimated cost. This will give you a better idea of the loan amount you'll need.
- Check your credit score: You are more likely to be approved for a loan with a good credit score. You can request a free credit report and review it for errors or issues that could negatively affect your credit score. If necessary, take steps to improve your credit score.
- Establish your budget: Work out how much money you need for your home improvement project and how much you can afford to repay each month.
- Research the market for the best home improvement loans available: We have compared the top home improvement loans available, so you may want to consider the home improvement loans shown on this page.Look for competitive interest rates, flexible repayment terms, and favorable loan terms.
- Identify your preferred lender and prepare to apply: Gather the necessary documents, such as proof of ID, address, and income, and details about your home improvement project before you start the application. Check with the lender to confirm the specific documents they require.
- Complete the application form and hit submit: Most home improvement loan applications are decided upon instantly, so there shouldn’t be a wait to see if your application is successful.
- Start your home improvement project: Once you've completed all the paperwork, you'll receive the loan funds. Begin your home improvement project as planned, using the funds to cover the costs.
Home Improvement Loan Alternatives
If you are looking to borrow a small amount of money for a short to medium-term period, home improvement loans are a great way to generate finance. However, there are other different methods to raise funds for home improvements that you can consider.
- Home Equity Line of Credit (HELOC): HELOC is available if you own a house and have sufficient equity in the property. Unlike home improvement loans, HELOC uses your house as collateral. You only pay interest on the amount you borrow, and APRs usually are lower than personal or home improvement loans.
- Cash-out refinance: This option sees you refinance your mortgage for more money than you owe. You can then use the excess amount of the mortgage for home improvement purposes.
- Government grants and schemes: Depending on the state you live in, government funding may be available if your home improvement relates to improvements in energy efficiency. Contact your local government if anything is available.
- Credit cards: If the amount for your home improvement is small, you can consider funding the project with your credit card. Make sure you have funds available to pay off the balance on a timely basis, however, as credit cards charge high interest rates.
If you want to improve an area of your home but don’t have funds available to do so, a home improvement loan is worth your consideration. Our comprehensive guide outlines the key factors to consider and highlights some of the best home improvement loans available. We’ve also outlined other options to ensure that you make the most informed choice.