Best Home Improvement Loans in January 2025

A personal loan for home improvement provides the cash you need for your home renovation project without using your home as collateral. The best home improvement loans also come with low rates and fees, fast funding, and flexible terms. LightStream is our top pick due to the lender's high borrowing limits, industry-low rates, and extended repayment terms, but you'll need good credit to qualify.

Best home improvement loans

There are several options for financing home improvements. Home equity loans and home equity lines of credit (HELOCs) are backed by the equity in your home; they may have higher loan amounts and lower interest rates but can take weeks or longer to get, and there's a risk of foreclosure. Credit cards may be an option for smaller projects, but rates are high unless you get a promotional offer (though 0% APR terms often max out at 21 months). The government also offers home improvement loans if you can qualify.

The lenders below offer the best personal loans for home improvement. These options are best if you don't have home equity or don't want to use it as collateral, or want an easy application process and quick funding.

Methodology

Credible evaluated 31 lenders and over 800 data points to find the best personal loans for home improvement. Our expert team considered interest rates, loan amounts, funding times, collateral requirements, repayment terms, and eligibility criteria, such as prequalification rates, credit score and income minimums, and approved loan purposes. We chose the best lenders based on the following weighted categories:

• Rates and fees: 18%
• Loan terms: 18%
• Customer experience: 17%
• Eligibility: 14%
• Customer satisfaction: 10%
• Efficiency: 10%
• Options for poor credit and no credit: 9%
• Discounts: 4%

Each data point was sourced and verified by a senior editor to make sure it was accurate and up to date. Learn more about how Credible rates lenders by exploring our personal loans lender rating methodology.

What are home improvement loans and how do they work?

A home improvement loan is money you borrow from a lender and repay over time, often via monthly installments that include a portion of the money you borrowed plus interest. Some loans also come with other fees. The lender provides you with the cash you need, so you can pay your contractors, purchase appliances, or buy materials to renovate your home.

Some contractors also offer financing in partnership with third-party lenders or credit unions, sometimes with an interest-free period. But you should compare options from direct lenders as well. If you choose contractor financing, the lender will pay the contractor directly, and you'll repay the lender over time.

There are several types of home improvement loans, and they each work differently. Options include home equity loans and HELOCs, credit cards, personal loans, and government-backed loan programs.

Ways to finance home improvement projects

Below are some of the loan types you can use to finance a home renovation. Bear in mind that requirements vary by lender, and some loan types may not be available to new homeowners with insufficient equity.

Personal loans

Personal loans are typically unsecured installment loans. Companies lend you a lump sum, and you repay it, plus interest and fees, over a set period. The loan amount, loan term, interest rate, and amount you receive depend primarily on your income and credit profile.

• Loan amounts and repayment terms: Generally, loan amounts can range from under $1,000 to over $100,000, and loan terms range from one to seven years or more. For example, Lightstream lets you take out a 20-year personal loan to pay for home improvements.
• APRs: The average APR on a 24-month personal loan is 12.33%, according to the most recent data from the Federal Reserve. APRs generally range from 7% to 36%, and origination fees (when charged) can be as high as 12% of the loan amount.
• Collateral: Unlike home equity loans and HELOCs, personal loans don't typically require collateral. That means there's no risk of foreclosure, according to Teri Williams, President and COO at OneUnited Bank.
• Funding and approval: There are other benefits as well. "The application process for a personal loan is typically less burdensome and faster because it does not require the lender to appraise the value of your home to determine if there is sufficient equity to support a home equity loan or HELOC," explains Williams.

Home equity loans

Home equity loans, also called second mortgages, are secured installment loans backed by the equity you have in a home. Like personal loans, you receive a lump sum amount. But lenders require an appraisal of your home to assess its current fair market value and then will determine the amount you can borrow based on their loan-to-value (LTV) guidelines.

• Loan amounts and repayment terms: Loan amounts depend on how much equity you have, your interest rate, the monthly payment you can afford, and the lender — you can often borrow up to 85% of your home's equity. Loan terms generally range from five to 30 years.
• APRs: Like a first mortgage, home equity loans have interest charges and closing costs. The APR you get will depend on your credit profile, but home equity loan rates may be below 8% if you have very good credit.
• Collateral: Since home equity loans are secured by your property, failure to repay the loan can result in foreclosure.
• Funding and approval: The approval and funding process can take a month or more.

Home equity lines of credit

HELOCs, like home equity loans, are backed by the equity you have in your home.

• Loan amounts and repayment terms: You can often borrow up to 85% of your home's equity. However, instead of a lump-sum loan that's repaid over a set term, HELOCs give you access to a credit line that you can use as needed for a set term — typically 10 years.
• APRs: APRs may be slightly higher than home equity loan APRs.
• Collateral: Since HELOCs are secured by your property, failure to repay the loan can result in foreclosure.
• Funding and approval: The approval and funding process could take several weeks.

During the draw period, you can withdraw funds up to your credit limit, and lenders may only charge you interest on the outstanding amount. Once the draw period ends, the repayment period begins, which generally lasts up to 20 years.

Some HELOCs don't have closing costs, while others may charge an origination fee or other upfront fees. If your property value decreases during the draw period, the lender may not allow you to borrow more money.

Cash-out refinance loans

Cash-out refinance loans involve taking out a new, larger loan to replace your existing mortgage and cashing out the difference.

• Loan amounts and repayment terms: You can often borrow up to 80% of your home's value. A cash-out refinance has closing costs, a new interest rate, and a new term (typically 30 years).
• APRs: Slightly higher than mortgage refinance rates (without cash out).
• Collateral: Like other loans that require a home appraisal, your home is on the line if you miss payments.
• Funding and approval: Like other loans that require a home appraisal, a cash-out refi could take weeks or longer to close.

Since a cash out refinance replaces your original mortgage and extends the repayment period, you could end up paying much more interest over the life of the loan.

Credit cards

For smaller home improvement projects, a credit card can be an excellent tool.

• Loan amounts and repayment terms: Since credit cards are a revolving form of credit, like HELOCs, you don't have a set repayment schedule and can borrow against your credit limit on an ongoing basis. Borrowing limits are often lower than other loan types, and not all contractors accept credit cards.
• APRs: The average APR for a credit card is 21.76%, according to the Federal Reserve. But some credit card issuers offer an introductory 0% APR for up to 21 months. Some store-branded credit cards also offer interest-free promotions — for example, if you're redecorating, you could avoid interest for up to 2 years with the Wayfair credit card.
• Collateral: Most credit cards are unsecured.
• Funding and approval: Approval is quick and you could make purchases the same day you apply with a virtual credit card.

Government-backed loans

The Federal Housing Administration (FHA) and the U.S. Department of Veteran Affairs (VA) insure home loans offered by private lenders, which may have easier qualification requirements and lower closing costs.

The U.S. Department of Agriculture (USDA) also offers direct loans and grants to low-income, rural homeowners. Several loan programs can help homeowners who need cash for home improvements, including:

• Title I Property Improvement Loan: Title I loans are home improvement loans backed by the FHA that can be used for specific purposes, such as making your home more livable or accessible. You don't need to refinance to get a Title I loan. These loans are typically secured by the property, but loan amounts less than $7,500 may be unsecured.
• Government-backed cash-out refinance: If you meet the requirements, you can get a cash-out refinance loan backed by the FHA or the VA.
• 203(k) Rehabilitation Mortgage Loan: The FHA offers two loan programs you can use to buy or refinance a property that needs repairs or improvements. 203(k) loans require more oversight than a cash-out refinance, and you can only use the funds for approved home improvements.
• 504 Single Family Repair Loans and Grants: The USDA offers grants to fix health and safety hazards as well as direct loans with a 1% fixed interest rate that you can use for modernization or improvements. You must live in a rural area and meet very-low income requirements to qualify.

Tips on comparing personal loans for home improvement

As you research lenders offering personal loans for home improvement, consider the following features:

• Eligibility requirements: If you have fair or poor credit, your options will be limited. Consider lenders that specialize in serving borrowers with credit issues, such as Upstart or Avant. Also, consider whether the lender has minimum income or maximum debt-to-income ratio requirements. If you have excellent credit and a high income, you'll likely have access to any lender.
• Loan amounts: Some lenders offer larger loan amounts than others. For example, LightStream offers personal loans up to $100,000, and BHG Financial offers loans up to $200,000, although the amount you qualify for depends on your credit score. Many home improvement projects are expensive, so make sure to choose a lender that offers the amount you need.
• Repayment terms: Many personal loan lenders offer repayment terms between one and seven years, but some lenders offer extended terms for home improvement loans. For example, LightStream may offer terms of up to 20 years for some loan amounts. A longer term can be helpful if you need a large loan and you have a tight budget.
• Rates and fees: Some lenders offer lower APRs than others. It's a good idea to prequalify with a handful of lenders or use a loan marketplace to compare your individual rate estimates with different lenders. If you have good credit, you may even qualify for a personal loan with no fees.
• Lender reputation: Check customer reviews on third-party sites like Trustpilot to determine if borrowers are generally happy with their experiences, and make sure the lender you choose is licensed in your state.

Current home improvement loan rates

Interest rates on personal loans for home improvement vary depending on your credit score, loan amount, and repayment term. The table below shows the average rate borrowers pay in each credit tier based on prequalification data from the Credible loan marketplace.

Common home improvement projects and costs

You can use a personal loan for almost any household expense, from installing new lighting to remodeling your kitchen. Below are some of the most common home improvement projects and their average costs, based on the 2024 Cost vs Value report from Remodeling Magazine.

You can also use a personal loan to make energy efficiency upgrades to your home. If you do, you may qualify for a tax credit or home energy rebate to reduce the cost. Low-income homeowners may also qualify for the Weatherization Assistance Program. Some states also have special programs for residents.

Pros and cons of personal loans for home improvement

How to get a personal loan for home improvement

1. Organize your finances: Check your credit score and determine your monthly budget for debt repayment.
2. Research lenders: If you decide to apply for a personal loan, narrow down your options by comparing requirements, repayment terms, loan amounts, and other factors. Find lenders that offer home improvement loans for your credit profile and annual income.
3. Prequalify: Check your rate with multiple lenders to compare APR estimates, loan amounts, and terms. Not all lenders allow you to prequalify directly on their site. For example, to prequalify for a Lightstream loan, you'll need to do so via a personal loans marketplace like Credible.
4. Formally apply: Choose the loan option that meets your needs and proceed with the formal application. Upload requested documents, suvh as that prove your identity, income, and address.
5. Sign your loan documents: Read your loan agreement and make sure you're content with the final rate and monthly payment. E-sign necessary documents to initiate the funds transfer to your bank account.

Related Articles:

• How Long Does It Take To Get a Personal Loan?
• How Much of a Personal Loan Can I Get?
• Best Personal Loans for Fair Credit
• Best Personal Loans for Good Credit
• Best Personal Loans for Excellent Credit
• Best Personal Loans With a Cosigner