Best Home Improvement Loans for 2019

If you own your own home, chances are good that you’ve considered a remodel or renovation at some point.

Maybe you don’t like your kitchen countertops or appliances and want to upgrade them to something more modern. Or maybe you need to make an emergency repair because your roof is leaking.

If you don’t have the extra cash available, you could consider using a home equity loans, HELOCs, credit cards, mortgage refinancing, or something else. There are, however, also home improvement loans built specifically to pay for home renovations which are often a great choice.

This guide will cover some of the best home improvement loans, the pros and cons, and how they stack up to other options.

In this guide:

• Best Home Improvement Loans for 2019
• When is a Home Improvement Project Worth It?
• What Kind of Projects Can a Home Renovation Loan Be Used For?
• Is It Possible to Refinance a Home Renovation Loan in the Future?
• How Much Do I Determine How Much I Need?
• What are Typical Home Improvement Loan Rates
• Alternatives to Home Improvement Loans

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Best Home Improvement Loans for 2019

Many lenders offer home improvement loans, while others offer general personal loans that you can use as a renovation loan. Here are a few options to consider.

LightStream

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APR Range

4.99% – 13.29%

Loan Amounts

$5,000 – $100,000

Min. Credit Score

660

The online consumer lending division of SunTrust Bank, Lightstream’s application process is simple to follow, and directions are posted on the company’s website. You’ll need sufficient income and assets to keep paying on your existing debt and the new loan, and you’ll also need to agree to the use of electronic disclosures for your loan documents. Finally, you need to apply as an individual; LightStream is a consumer-based lender and doesn’t issue business loans.

Once you’ve completed the application, you’ll find out on the same day whether you’ve been approved for a home renovation loan. After approval, you will need to have a valid Visa or Mastercard to verify your identity; LightStream states that no charges will be applied to the card. Disbursement on your new loan could happen as soon as a few hours after approval, so you can get ready to start your home improvement project.

Loan Amounts & Terms

LightStream offers whole-project funding loans from $5,000 to $100,000, so you can borrow enough to renovate just about any part of your home.

If you borrow less than $10,000, you can choose a loan term of up to 72 months (six years). The larger your loan amount, the longer the available term. For a loan between $50,000 and $100,000, you can get a loan term as long as 144 months (12 years).

Rates

Interest rates for LightStream home improvement loans vary based on term, loan amount, and your creditworthiness as a borrower. Typically, LightStream only lends to borrowers with very good credit or above, and in order to get their best rates of 4.99% APR, you’ll need excellent credit. In addition, you’ll also need to sign up for automatic payments, which will qualify you for a .50% rate discount.

SoFi

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APR Range

5.74% – 16.99%

Loan Amounts

$5,000 – $100,000

Min. Credit Score

660

SoFi, short for Social Finance, was founded in 2011 by four students attending Stanford Graduate School of Business. The goal for their new venture was to provide lending alternatives for students trying to pay off their educational loans. Less than a decade later, SoFi has expanded to offer a variety of personal loans that can be used for your next home renovation project.

Loan Amounts & Terms

Sofi’s loan limits aren’t publicized on their website, possibly because your credit score and annual income play a large role in how much they’ll allow you to borrow. Their minimum loan amount, however, is $5,000, and you can choose a repayment term between two and seven years.

SoFi’s ideal borrower has an income of more than $100,000 and very good to excellent credit. Because they prefer to lend to borrowers with a high-income, high-credit profile, they can offer loans with few, if any, fees.

Funds are disbursed in as little as one business day, and you can apply at their website in under two minutes.

Rates

Their typical clientele also enjoys some of the best rates in the industry, starting at only 5.99% APR for a fixed rate loan with auto pay enabled. Even their highest rate is still competitive at 16.34% APR. You can check what your rates would be without a hard credit that would affect your credit score.

Citizens Bank

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APR Range

6.79% – 20.39%

Loan Amounts

$5,000 – $50,000

Min. Credit Score

680

In the northeastern United States, Citizens Bank is a mainstay lender. With branches in Connecticut, Massachusetts, New Hampshire, New York, New Jersey, Pennsylvania, and Rhode Island, Citizens Bank offers personal loans that you can put toward your next home renovation.

You can apply on their website, and like many online lenders, Citizens does a soft credit pull, which allows you to check your projected interest rate without it affecting your credit score. Once you complete the full application and are approved, you can get your money in as little as two business days.

There are no fees at Citizens Bank, origination or otherwise. There’s also no collateral needed; these home repair loans are unsecured.

Loan Amounts & Terms

You can borrow anywhere from $5,000 to $50,000 with Citizens Bank, depending on the extent of your home renovation. Loan terms run from three to seven years.

Rates

Interest rates on all Citizens Bank loans are fixed and somewhat competitive, starting at 7.96% APR for borrowers with excellent credit. Those with a less desirable credit profile can pay up to 20.89% APR.

Earnest

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APR Range

6.99% – 18.24%

Loan Amounts

$5,000 – $50,000

Min. Credit Score

680

Earnest, started out with student loans in 2013, but the San Francisco company has since expanded to offer a variety personal loans as well.

To apply, you’ll need to have proof of consistent income, be over the age of 18, and live in one of the 45 states that Earnest operates in. You’ll also need a credit score of at least 680, with no bankruptcy in the last three years, a solid history of on-time payments, and no open collection accounts.

Much like SoFi or Citizens, you can check your rate in less than two minutes on their website without harming your credit report or registering any hard credit inquiry on it.

Loan Amounts & Terms

With Earnest, you can borrow any amount between $5,000 and $75,000, which is higher than many other competitors. There are no fees, so what you see is what you get; all you’ll pay on the loan is interest. Loan terms run from three to five years.

Rates

Interest rates start at 6.99% APR for borrowers with excellent credit, and you can choose either a fixed or variable rate loan depending on your needs.

Unlike most other competitors, Earnest also takes into account other factors like your savings patterns, career projection, and much more, giving them a well-rounded look of both your finances now and your future plans. Fixed Rates at Earnest can go as high as 18.24% APR for less creditworthy borrowers who choose a longer repayment term.

LendingClub

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APR Range

6.95% – 35.89%

Loan Amounts

$1,000 – $40,000

Min. Credit Score

600

Peer-to-peer lending has become quite popular in the last few years, and leading that pack of lenders is LendingClub, which offers personal loans funded by investors who look at your credit profile and decide whether you’re a good risk as a borrower.

Applying for a home improvement loan at LendingClub is simple, with a quick online application that allows you to check your rate in minutes without harming your credit score.

Loan Amounts & Terms

Unlike many competitors, instead of asking for approval for a specific loan amount or term when you apply at LendingClub, you’re offered a range of loan products that you qualify for based on your income, credit, and other underwriting factors. You can then choose the loan that works for you.

Rates

If you have excellent credit, you can expect to pay their lowest rates, starting at 6.95% APR. But those with lower scores should consider other options first, as LendingClub’s rates can go as high as 35.89% APR.

LendingClub also charges an origination fee that could be anywhere from 1% to 6% of the loan amount, which will be deducted from the loan proceeds at the time of disbursement. That means you’ll be paying interest on the full loan but won’t receive all of the funds you applied for.

Eloan

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APR Range

7.99% – 10.49%

Loan Amounts

$2,000 – $35,000

Min. Credit Score

N/A

If you are looking for a smaller home rehab loan for a quick fix or simple renovation, Eloan may be an option. Like other online lenders, you’ll be presented with several options for rate and term when you apply; once you choose the terms you want, you’ll then fill out the full loan application and receive your funds as soon as the next business day in some cases.

Loan Amounts & Terms

Their loan products start at just $2,000, so you can borrow only what you need. For larger projects, you can borrow as much as $35,000.

Terms range from 24 months to 60 months (two to five years), giving you a great amount of flexibility in setting up monthly payments on your new home renovation. All in all, Eloan might be comparatively newer to the online lending industry, but they’re definitely making waves with their personal loan products.

Rates

Eloan’s interest rates start at 7.99% APR for top credit borrowers, and even their highest rate is still very competitive, at only 10.49% APR. Eloan also has zero fees on their loans.

How We Chose the Best Home Improvement Loans

To find the best home improvement loans, our Editorial Team analyzed products on product information, fees, eligibility & application, customer support, and discounts & benefits. There were multiple data points analyzed within each category and each data point was weighted by importance.

Learn more about our ratings and methodology here.

When is a Home Improvement Project Worth It?

While the idea of a home improvement project can seem fun, it’s a big financial decision, and it should be weighed carefully, particularly if you’re going to borrow money to finance it.

There are a few situations where it might be worth it to invest in a home improvement project:

• If your home isn’t functional or working well for the needs of your family
• There are certain home improvements that can save money, such as adding new energy-efficient features, such as solar panels
• You want to sell your home for the maximum possible price

Be careful about putting so much into a home improvement project to the point where it’s a bad investment. Here are a few things to consider to determine if your renovation loan is worthwhile:

• Look at the amount you’re applying for. Is it enough to finish your project? Keep in mind that home improvement projects often end up going a bit over budget.
• Consider the term and interest rate. How much will the loan cost you over time? If you’re asking for $10,000, you could end up paying much more than that by the time the loan is finished — in some cases well over $15,000 or more. Use the total repayment number when considering how much your project will cost in the end.
• Are you choosing a fixed or variable-rate loan? If you have a variable interest rate, the rate you pay now might not be what you are paying later — and that translates to more cost.
• Consider your home value. Ideally, your project will increase the value of your home by more than what you’ve put into it, so it’s important to understand both the long-term cost of your loan and the potential increase in your home’s value before you sign on the dotted line.

Ask the Expert

Steven Millstein

Certified Financial Planner & Editor of CreditRepairExpert

When should you take out a home improvement loan?

There are a few factors to consider to determine when you should take out a loan to improve your home. Ideally, you should have good to excellent credit and a reliable source of income. Because the repayment schedule can depend on the finance option you choose, don’t forget to consider your future plans.

Loans that are secured by your home, including HELOCs and second mortgages, must be repaid when you sell your home, for example. If you plan to sell your home within a few years, make sure you have a plan to pay back the loan by then or that you have accounted for the expense.

The closing process should also be taken into consideration. Unless you choose to finance your home improvement with credit cards, you can expect to go through an application and underwriting process that can take 6 to 8 weeks. If your goal is to start on your home renovation in early spring, you should take out the loan in the winter.

Is taking out a personal loan a good option for home improvement projects?

A home improvement loan is an unsecured personal loan which means it isn’t tied to your home. This type of loan can be easy to qualify for through an online lender and it may be possible to get the funds within just a few days. This can be a good option if you need the money to begin your project right away and you have very good credit to qualify for the lowest interest rates.

What about a home equity line of credit?

A HELOC allows you to borrow against the equity in your home. This is a unique loan option because it has a draw period and repayment period. During the draw period, you can take out the amount of money you need, as you need it, up to your approved limit. After a period of time, your draw period ends and you make monthly payments toward interest and principal. HELOCs almost always have variable interest rates.

A HELOC is a good choice if your renovation will go on for some time or you aren’t sure exactly how much you need. During the draw period, you can make interest-only payments for extra flexibility. The downside is the interest rate is likely to rise and increase your payments.

What Kind of Projects Can a Home Renovation Loan Be Used For?

There are a thousand different ways you could upgrade or remodel your home.

• Bathroom expansions and remodels
• Kitchen remodel and appliance replacement
• New windows or doors
• Insulation for attics and crawl spaces
• Finished basements
• Repaving driveways and sidewalks
• Landscaping
• Swimming pools and hot tubs
• Room additions or enlargements
• Fireplace additions or inserts
• Heating/Air conditioning installation

The potential for renovation is only limited by your creativity, your budget, and your credit rating. Ideally, you should have a good credit score to get a low rate, but there are lenders who offer Home Improvement Loans for Bad Credit.

Is It Possible to Refinance a Home Renovation Loan in the Future?

The short answer is, yes, you probably can. Most loans can be refinanced, whether it be through a debt consolidation loan, home equity loan, or some other financial product. The purpose of doing a refinance is to renegotiate your terms and decrease your interest rate.

Before you do so, however, you’ll need to understand that the process can often be complicated, and in some cases, it won’t save you any money after origination fees or balance transfer fees are applied. And in some cases, it may even cost you more in the long run.

If you use a home equity loan to refinance your improvement project, for instance, you’ll be putting your house at risk if you cannot make the monthly payments, even though the interest rate may be lower than that of the original personal loan you took out to do the work. So make sure you can handle the payment before using your home as collateral.

Or, if you refinance into another personal loan with a longer loan term, you may end up paying more even with lower rates and smaller monthly payments because the borrowed balance will have a longer time to accrue interest.

These risks shouldn’t scare you away from refinancing your loan — you just need to do the math and assess your ability to keep up with payments before you take action.

How Much Do I Determine How Much I Need?

Before you even start applying for loans, you’ll want to know how much money you need. In order to do that, you’ll need to know how much your rehab project will cost. Get quotes from a few different contractors to get estimates for the cost of materials and labor you will need.

Make sure to add unforeseen costs into your projections; home improvements often go over budget, and you never know what you’ll find once you start knocking down walls or digging around in the attic.

If you choose to do the work yourself, make sure to figure in the cost of additional materials. You may end up needing to buy more lumber if you make a mistake measuring and cutting, or you might underestimate the amount of paint you need.

Whatever your project is, plan out everything you’ll need in as much detail as you can. You might not be able to know the exact number of screws or buckets of paint you’ll need, but your research should help you get to an estimate that is both reasonable and realistic.

What are Typical Home Improvement Loan Rates

Personal loan interest rates can be high, particularly for applicants who do not have good credit. For example, many personal loans have annual percentage rates as high as 35% or more. Before using a personal loan for home improvements, you need to think about the potential ROI you would get from the project and whether it justifies the high cost of a personal loan.

On the other hand, borrowers with excellent credit can qualify for personal loans with rates less than 5%. After pre-qualifying for a home renovation loan, compare your rates with some lending alternatives before taking out a loan.

Alternatives to Home Improvement Loans

Home Equity Loans

Home equity loans are often considered home improvement loans, and there are a few options that can fall into this category. This includes second mortgages, HELOCs — which will be covered in more detail below — and cash-out refinancing.

With a home equity loan, you’re borrowing against the equity you have in your home. Since there is collateral, which is your home, they tend to be easier to qualify for than other options. A traditional home equity loan is paid in a lump sum and is repaid in installments. The interest on this type of home improvement loan might also be tax deductible.

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Typical Interest Rates

Home equity loans tend to have the benefit of low interest rates, particularly compared to options like credit cards and unsecured personal loans. This is because the loan is secured by the value of your home. Your exact rates will vary based on your credit, your loan-to-value ratio, and other factors, but most borrowers can expect to pay between 4% and 6% for a home equity loan.

How to Apply

The application process for a home equity loan is will be more comprehensive than applying for a personal loan. Most lenders want to see an 80 percent loan-to-value ratio after your home equity loan for approval.

That means you need to own at least 20 percent of your home to qualify. Most lenders require a credit score of at least 620 to qualify, and a lender is going to want to verify your finances to make sure you’re going to be able to pay. This might mean looking at not only proof of income but also things like your tax records.

Anything Else to Know?

While home equity loans can be a good option to pay for home improvements, one of the biggest risks is that if you take out a loan and you’re not able to repay it, you could lose your home. This is important to keep in mind.

>> Read More: Should you use a home equity loan or line of credit for remodeling improvements?​

HELOCs

Home equity lines of credit, or HELOCs, are a little different from traditional home equity loans. It is still based on providing you financing because of the equity you’ve built in your home.

However, a HELOC is revolving credit similar to a credit card. This means that you don’t receive a lump sum that you then pay back in regular installments. Instead, you receive access to a line of credit, which you use and pay back as necessary. There is also a risk of losing your home with a HELOC.

Typical Interest Rates

Your HELOC rates will vary based on your creditworthiness and the amount of home equity you possess. That said, the interest rate on HELOCs is usually pretty low compared to something like a personal loan or credit cards. It may, however, be a couple of percentage points higher than the 4% to 6% rate you’d get on a home equity loan.

How to Apply

Your credit score usually plays a pretty important role in whether or not you’re approved for a HELOC. You should also check on the available equity you have in your home as compared to the home’s value and the amount of money you need to borrow. Qualifying and applying for a HELOC is pretty similar to the process for a traditional loan.

Anything Else to Know?

One of the biggest pros of a home equity line of credit is that you can use only the amount of credit that you need, and there are often flexible repayment options as well. However, it’s easy to overspend if you have access to a large line of credit, and many HELOCs are variable-rate, so your rates can go up over time.

>> Read More: Home equity line of credit vs. personal loan for small home improvements​

Credit Cards

Some people might think about putting a home improvement or renovation project on a credit card. This is usually a bad idea unless there are very particular circumstances. First, credit cards tend to carry high interest rates, and they are usually significantly more than the rates on something like a home equity loan or HELOC.

If you do want to use a card, it should be a card that’s offering a 0% APR period or one that has some sort of valuable promotional offer. Then, if you can repay the expenses you charged before the promotional period ends, it might not be such an expensive way to fund a home improvement project. If you don’t think you would be able to reasonably manage paying off the costs of your home improvement project quickly, it’s probably best to reconsider using a credit card.

Mortgage Refinancing

If you are looking for home improvement loans or ways to fund a home improvement project, you might also consider refinancing your mortgage. This means you’re getting a new mortgage, which should theoretically also come with a lower interest rate. You can do a cash-out refinance to borrow against the equity you have in your home.

While a cash-out mortgage refinance can be a viable option to finance home improvement or renovation projects, you want to make sure you’re not actually ending up with a higher monthly mortgage payment as a result. For example, if you roll the fees into the amount of the loan you’re getting, you might be paying more.

Ask the Expert

Eric Rittmeyer

President of Fidelis Mortgage & Certified Reverse Mortgage Professional

Would you ever recommend taking out a second mortgage as a way to finance home improvement projects?

While this can be a great, cost effective (and possibly tax beneficial) tool to use, there are some things to consider:

Will the improvements add additional value to the property? Over-improving a property can spell trouble if/when you decide to sell. Before doing any major improvements, research your neighborhood to see what comparable properties are selling for. You might find selling the property and purchasing a new home to be a smarter move.

Can you afford the payments? Taking out a second mortgage means you’re placing a lien on the property. This means you could run the risk of foreclosure in the event you’re unable to make the monthly payments. Make sure you’re 100% comfortable with the payments associated with the new mortgage.

Are there other assets available to draw from? Take a look at your current accounts to see if withdrawing from them may be a better option instead of taking on a loan with monthly payments. I would highly recommend talking with your tax professional and/or financial advisor before making any final decisions on this. Although you’d be accessing funds without incurring a monthly expense, there could be tax ramifications and/or withdrawal fees.

What about refinancing a mortgage that you currently own? Would this be a good idea?

The one great thing about a low interest rate environment is borrowing money is more affordable. Instead of using a second mortgage to access funds, refinancing your existing first mortgage might be a better option.

For starters, the interest rate for a first mortgage will be lower than a second mortgage. In addition, if you’re able to reduce the current rate on your existing loan, you may be able to borrow additional money and not realize an increase in your monthly mortgage payment.

This could be a more costly option (in comparison to a second mortgage) in terms of settlement costs. The key is how much are the total settlement costs and how long will it take you to recoup them?

Are there any other financing options available?

Although there is a minimum age requirement, the federally insured reverse mortgage program can be a great option for homeowners 62 and over who are wanting to make improvements to their property.

A lot of our clients have reached a stage physically in their lives where they need to make adjustments to their house. A reverse mortgage will give them access to a percentage of their property value and will not require any monthly principal and interest payments.

They could draw the funds, make the improvement, and remain in the property of the rest of their lives. The interest is deferred until the end of the loan, which is when the last borrower permanently vacates the property (normally upon their passing). The property is sold, the reverse mortgage is paid off, and the heirs walk away with all of the remaining equity. There’s also a Reverse Mortgage for Purchase program for borrowers who would rather sell their existing home and purchase a new home with no monthly mortgage payments.

Bottom Line: Choosing the Home Renovation Loan That’s Right for You

Your home is a major asset in your financial portfolio, and upgrading or renovating it can help its value grow, leading to more equity and financial stability for your family. Home renovation, however, isn’t a small venture. Before you visit lenders, hire contractors, or put any down payments on materials, make sure that you understand the project itself and what will be necessary to complete it.

Once you’ve reached the point of shopping for a home improvement loan, pay attention to things like fees, interest rate, terms, and amounts. All of those factors will help you decide your best path forward to a finished project — and the added value it’ll bring to your home.