Updating your home revitalizes its look and feel and increases the property value. These benefits come at a cost, however. For homeowners without money stashed away, the best home improvement loans make the renovations more affordable.
In our article, you’ll find:
No fees and good APR
Discounted rate if you select autopay
No minimum down payment or equity requirements
LightStream is a respected provider that rewards clients with good credit with low-interest rates. The company is transparent with its rates and qualifying criteria.Read full review
Low qualifying requirements
Easy online application and verification
Custom loan options starting at 8 years
Quicken Loans provides a selection of financing options. The firm offers a robust platform that’s simple to use. While the rates are slightly higher than average, it’s hard to beat the convenience and lower credit score requirements.Read full review
Ten-year interest-only options available
Lines of up to $250,000 at no closing costs, no application fees
Lower and no-down-payment options with no mortgage insurance
Alliant Credit Union is a reputable organization that provides clients with reasonable rates. The firm is transparent about its fees and provides consumers with a simple application process. While no one product offers the perfect combination of low-interest, no-down-payment, and no PMI, such options are all individually available.Read full review
Low fees and good APR
Best government home repair loans
Prequalification takes a few minutes, no hard credit pull
AmeriSave is a well-established company with over 15 years of experience in this field. While specializing in refinancing, the firm also offers the full range of government-backed loans. Clients may additionally select fixed or variable rate mortgages and jumbo loans. If you require a cash-out refinance, check the rates through AmeriSave first. You’ll see what you qualify for in minutes, without affecting your credit rating.Read full review
Multiple loan options
Lender credits available on new mortgages
Low-income and low-interest home improvement loans
PenFed Credit Union cares about its clients. It gives reasonable rates and assists low-income earners with low-down-payment loans. Its wide range of products makes it easy to find the correct match for your needs. The service scores high points with the Consumer Financial Protection Bureau. The firm caters to first-time and repeat buyers and works with you to finance your dream home.Read full review
Lifetime guarantee on refinancing fees
Applicants may complete the entire process online
Provides 203k home improvement loans for new homeowners
LoanDepot provides a wide range of products at reasonable rates. It’s one of the few lenders on this list to specialize in 203K financing. With a minimum down payment of just 5%, a maximum loan of $3 million, and various products, it’s also one of the most versatile lenders.Read full review
No need for home equity to apply
Considers some stock investments as income
The pre-qualification process doesn’t affect your credit rating
SoFi provides clients with a reliable range of products and some exciting value-adds. The APR might be slightly higher than the norm, but the personalized financial planning and career coaching offset this cost. SoFi is a responsible lender and gives clients the tools to improve their financial future.Read full review
In this review, we narrow down the top loan providers in this area. To identify the best candidates, we considered:
✓ Eligibility Requirements: We looked at what it took to qualify for a loan with each credit provider.
✓ Types of Lenders: We stuck to companies specializing in home renovation loans or mortgages. We ignored options like credit cards and payday loans because they’re too expensive.
✓ Fees and Repayment Terms: The companies on this list charge no or low fees and offer repayment terms of at least five years. We chose lenders that capped their APR at 36%.
✓ Credibility and Online Reputation: Our top picks have moderate to strict lending requirements. They’re more conservative lenders that guard against making their clients overindebted.
LightStream is best for borrowers with strong credit. The company applies strict qualification criteria:
The APR starts at 3.99% and depends on the amount of the loan and term. The firm only offers fixed-rate loans. You may borrow between $5,000 and $100,000 over a term of between 2 and 12 years.
The Rate-Beat guarantees that you’ll get the best interest. If a competitor gives you a better rate for the same type of loan, contact LightStream, and they’ll come in at least 0.10% lower.
Unlike most of the other niche lenders, the firm has a $100 30-day satisfaction guarantee. If a client is unhappy with the rate within the first thirty days of having the loan, the company pays out $100.
You must use the loan for the purpose for which you apply. The company splits home renovations into several categories to help you further narrow things down.
|AMOUNTS RANGE||$5,000 to $100,000|
|APR RANGE||5.99% to 16.99%|
|MIN. DOWN PAYMENT||0%|
|MIN. CREDIT SCORE||660|
Quicken Loans takes the title of best home improvement loans for bad credit. They use their unique digital interface, Rocket Mortgage, to process applications quickly and effectively. It falls under the category of non-banking financial institutions. Financing, therefore, comes from investors rather than depositors.
The closing costs are generally around 3% to 6%, and the firm usually works them into the repayment schedule. The range of products includes both fixed and variable rate loans repaid over a maximum period of 30 years.
The rates are slightly higher than with other companies, but the qualifying criteria are more relaxed. You may qualify for an FHA mortgage with a credit rating of 580, and there is no minimum length of credit history requirement.
You’re restricted by the value of the property and the loan-servicing limitations set by Fannie Mae legislation.
|AMOUNTS RANGE||$5,000 to $510,000|
|APR RANGE||7.16% to 29.99%|
|MIN. DOWN PAYMENT||3%|
|MIN. CREDIT SCORE||580|
Alliant is one of the top lenders in the US. It’s best for first-time buyers with a small down payment.
Clients that qualify for the Alliant Advantage Mortgage program under the minimum credit score do not need a deposit or to take out private mortgage insurance. Clients who are buying a second or third home must put a deposit of 5% down and may also avoid the insurance.
To qualify, you’ll need a credit score of at least 620 to 700. The firm uses a generous debt-to-income ratio of up to 50%, making it slightly easier to qualify with a lower income.
The firm may charge between $995 and $1,795 for origination fees depending on the product.
You must be a member of the union to apply. Fortunately, you may do so easily by donating to one of their partner organizations.
|AMOUNTS RANGE||$1,000 to $50,000|
|APR RANGE||6.24% to 10.49%|
|MIN. DOWN PAYMENT||0%|
|MIN. CREDIT SCORE||620|
AmeriSave is an excellent option for those looking for cash-out refinancing. It offers reasonable interest rates and is an excellent option if you want to consolidate debt. It doesn’t officially provide a home improvement loan, but if you qualify for cash refinancing, you may use the money for any purpose.
It also provides government-backed loans. The firm doesn’t provide home equity or HELOC loans but gets most of its business through refinancing.
You may use the funds from your cash-out refinance for any purpose.
|AMOUNTS RANGE||$5,000 to $500,000|
|APR RANGE||3.49% to 16.99%|
|MIN. DOWN PAYMENT||3%|
|MIN. CREDIT SCORE||620|
Started in 1935, PenFed is one of the most established loan providers on our list. They’re best for those wanting small home improvement loans. The firm provides mortgages as well. These include fixed and variable rates, as well as conventional and low-income loans.
While they don’t provide FHA-backed mortgages, their HomeReady program offers similar benefits. New and repeat buyers may apply for all programs. The firm provides refinancing, but the lender credit only applies to new mortgages.
The firm will accept income from various sources such as wages, grants, and gifts when assessing affordability. The APR for home remodeling loans starts at 6.49%, and you have up to five years to repay the loan.
The firm offers lender credits on purchase mortgages as follows:
If you request money for home improvements, this installment loans provider reserves the right to confirm that it’s been spent on that later.
|AMOUNTS RANGE||$1,000 to $20,000|
|APR RANGE||6.49% to 16.99%|
|MIN. DOWN PAYMENT||3%|
|MIN. CREDIT SCORE||620|
LoanDepot is the top option for those needing 203K financing. With this type of loan, homebuyers may opt to include renovation costs in the purchase price as well. The firm also offers Fannie Mae HomeStyle improvement loans, conventional mortgages, government-backed loans, and jumbo loans.
There is no better option for home improvement loans for first-time buyers. The company provides clients with low-down-payment opportunities at APRs, starting at 4.14%. The credit criteria are moderately strict.
LoanDepot offers one thing that no other competitor does – a “lifetime guarantee” on subsequent refinancing fees. It’s an exciting concept. If you refinance the same property with them again, they won’t charge a lender fee and will reimburse the appraisal fee.
It’s the closest you’ll come to a 0% home improvement loans. They issue you with a certificate to this effect, and you must produce this to qualify in the future.
Clients have the option to conduct the entire application online.
The restrictions depend on the product. The proceeds from 203K loans must be used for purchases and renovations. Cash-out loan proceeds may be used as required.
|AMOUNTS RANGE||up to $3 million|
|APR RANGE||4.14% to 17.51%|
|MIN. DOWN PAYMENT||5%|
|MIN. CREDIT SCORE||620|
SoFi provides home improvement loans for over 20 years. It doesn’t offer federally backed loans. It usually offers jumbo loans, but the coronavirus pandemic has forced it to halt this offering at this stage. They’ll reinstate it, so check with your loan officer when applying to see if it’s available.
It’s a conservative lender, so the credit criteria are stricter than most companies’ on this list. The firm is best for borrowers with excellent credit and a proven ability to save. The company expects a down payment of at least 10%.
The APRs offered are average, so borrowers with top credit ratings should shop around. SoFi may, however, be the best way to finance home improvements if you’re not a typical wage earner.
SoFi will consider stock incentives as part of your income in some cases. Few lenders do the same. It also considers income from self-employed businesspeople.
You may not finance investment properties.
|AMOUNTS RANGE||$5,000 to $100,00|
|APR RANGE||5.99% to 18.53%|
|MIN. DOWN PAYMENT||10%|
|MIN. CREDIT SCORE||680|
Home improvement loans work similarly to secured and unsecured personal loans in that they’re installment financing. Where they differ is the nature of the security, repayment term, and amount. Consumers must use the funds to repair or upgrade their homes.
Applying for renovation financing is slightly more complicated:
There are several options for those who would like to renovate their homes:
✓ Secured and unsecured personal loans: For small renovations, personal loans are one alternative. The advantage is that funding is faster. There are fewer personal loan stages than is the case with a mortgage. However, the interest rates are typically higher, and you repay the loan over a shorter term.
✓ HELOC loans: This type of loan allows you to borrow the maximum amount of money. You may draw the money down as you need it, allowing you to manage the interest that you pay more effectively. Your home serves as the collateral. You’ll typically need to sign up for an automatic withdraw from your bank account for payments.
✓ Home Equity Loans: These are similar to HELOC loans in that you borrow against the equity in your home. The primary difference is that the funds are paid out in one lump sum. You’re not able to draw down on the money you’ve repaid.
✓ Cash-out Refinance: This type of loan replaces your existing mortgage, any liens, and expenses. You’ll apply for this sort from home improvement loan lenders when the costs equal more than the transaction as a whole.
✓ Credit Cards: The revolving credit facility makes credit cards more expensive than other forms of renovation financing because you may draw down on the capital over time. However, if you’re able to secure a low-interest option, secured credit cards on the market provide easy and quick access to financing.
✓ Rehab Loans: The 203K loan allows you to register your mortgage at a higher price than the home’s current value. The extra money is used to renovate the property. This feature makes it one of the top home improvement loans.
Home renovations can be costly but typically improve your property value significantly. Nothing dates your home quite as quickly as a bathroom or kitchen that looks like a leftover from a different decade.
Improving the layout of the home and updating it makes sense for a better quality of life as well. However, it’s not a decision to rush into. Partnering with the wrong loan institutions at the wrong time might prove disastrous for your financial future.
Before you even start looking, ask yourself the following questions:
There’s a big difference between replacing flooring to update the look and needing to because the flooring is unsafe. Costs for the latter are emergency expenses, and so you’re not able to put them off.
Where repairs are urgent, a personal loan for home improvement makes more sense because of the funding speed.
When vetting your application, financiers look at the risk that lending you the money poses to them. Depending on the amount of the loan, they might require security. There are two ways for them to proceed:
When you see home improvement loans, no equity is required; the loan is usually drawn from the paid-up capital balance. This amount represents the difference between your original mortgage and the current balance.
If you only pay the minimum installment, your balance only starts to reduce after about two or three years. This is because the monthly interest payments are higher in the beginning. To illustrate how this works, it’s easiest to use an example:
We’ll make it easy by assuming that you’ve got a mortgage of $300,000 and are repaying it over twenty years, with an APR of 5%. The first part of the repayment equation is simple. If you could secure interest-free home improvement loans, you’d pay around $1,250 a month.
Unfortunately, loans don’t work that way, so you must also account for the interest at 5% per annum. On $300,000, that would be around $1,232.87 in the first month.
So, while you’re paying $1,250 a month, the majority goes towards interest. In your first month, you pay just $17.13 off the capital balance of your loan. When the company calculates your next installment’s interest, they work on a balance of $299,982.87. The interest will go down by about $0.07.
As you make more payments, the interest portion reduces, but it takes a while to make a dent in the capital. If you’ve paid off a sufficient amount, companies offering home improvement loans online may not need to appraise your property. You’ll also pay lower fees.
Home equity works differently. Here you use the difference between the balance in the mortgage and the current value in the home. The bank will usually allow you to borrow up to a certain percentage of the property value.
They will require a property appraisal and will register an additional lien over the home. This method, therefore, takes longer and costs more. The advantage is that you can usually get a larger loan amount than with home improvement loans without refinancing.
Do you want to buy a fixer-upper or renovate your existing home? Are you hoping to have some money out for paying off debt as well? If you’re going to refinance, it’s worthwhile considering paying off some high-interest debt at the same time.
This only works, however, if you pay off the debt and close the accounts. To see the interest benefit, you’ll have to pay extra into the home loan every month. It’s wise to match the installments you paid to the debt.
All of the major bureaus provide free credit reports at least once a year. If your score has improved since you first applied, you might get your new loan at a better rate. If not, try to work on your score for at least six months before applying.
Improve your rating by:
Some home improvement loan companies cap the amount they’ll allow you to spend on renovations. This may be around $40,000, so check upfront to see if you’ll get as much as you’ll need.
It’s also worth checking if you’ll have to pay any fees out of your pocket.
The APR includes all the interest and fees charged by the company. These fees are usually lower at a federal credit union. It’s essential to compare the APR rather than just the interest percentage. The APR includes all the charges, giving you a better representation of the cost of the loan.
Choosing a longer repayment term makes things more affordable but also means that you pay more in interest. Look for home improvement loans with the lowest rates and ensure that you don’t pay penalties for repaying them early.
Then pay as much extra a month as you can safely afford to reduce it fast.
Choosing to renovate your home may be one of the best financial decisions you make. The best home improvement loans provide you with affordable access to financing at reasonable rates. Our seven top picks offer quality products that will suit most homeowners.
Now it’s just up to you to narrow down your options.
That depends on how much you’re borrowing. Cash-out refinancing provides extra cash to use for whatever you like. A HELOC or home equity loan comes in at a lower APR. A 203K gives you the freedom to buy and restore your dream home.
These are typically short-term loans, repayable over a five-year term. The interest rate is likely to be higher than with a mortgage, but the shortened term means that you could pay back less in the end than with a mortgage.
You can borrow money for renovations by approaching accredited financial institutions. It’s crucial to vet such companies to ensure that you get a fair deal and a good interest rate.
To get this type of financing, you’ll need to:
The best home improvement loans offer you several options. You’ll need to look for a combination of low APR and affordable repayments. It’s also worth checking if there are penalties for repaying the amount early.