Home Improvement Loans With Bad Credit
Home improvement projects can be costly but having below-average credit can make it difficult for some to qualify for home improvement loans. Fortunately, there are a variety of lenders who offer them to people with bad credit.
There are many expenses associated with homeownership, but few are as costly as home repairs and improvements. In some cases, these can be planned projects designed to improve aesthetics and efficiency or to increase the overall value of your home. In other cases, they may be completely unexpected, leaving you with limited time and money to address potentially dangerous issues.
Regardless of what’s prompted your home improvement project, the total cost of it will depend on a variety of factors, including your access to affordable labor and supplies. Some projects, like upscale kitchen remodels, can cost in excess of $60,000, while others, like minor bathroom updates, may be substantially less.
Loans are often used to cover these costs, but the best home improvement loans are often saved for borrowers with good or excellent credit. If you have below-average or even bad credit, you may be concerned about finding personal loans for these kinds of expenses, but fortunately, there are options available.
On this page:
- Home Improvement Loans for Bad Credit
- Choosing a Home Improvement Loan if You Have Bad Credit
- Home Improvement Loan Application Process
- Alternatives to Home Improvement Loans
- Improve Your Credit Score
Home Improvement Loans for Bad Credit
The following lenders offer some of the most competitive personal or home improvement loans for borrowers with bad credit.
Aside from accessibility for borrowers with below-average credit, another benefit of OneMain Financial home improvement is speed. Approved borrowers can receive funds as soon as the same day by check, or one to two business days by bank transfer.
In addition, although OneMain Financial does charge an origination fee, the fee is built into the monthly payment and therefore borrowers do not need to worry about paying it up front or having it deducted from their loan proceeds.
OneMain Financial requires borrows to meet with a loan counselor before approval. For some, this can be a benefit, but for borrowers who don’t live near a OneMain branch location, this can be problematic.
Rates & Fees
- Rates: 16.05% to 35.99%
- Repayment Terms: 2 to 4 years
- Loan Amounts: $1,500 to $30,000 (minimum loan amounts apply in certain states)
- Fees: Origination fees vary by state
- Valid ID, proof of residency, proof of income
- No minimum credit score requirement, although borrowers’ average scores are between 600 and 650
- No minimum annual income requirement, although borrowers’ average income is $49,000
- Collateral may be required for higher loan amounts (not all OneMain loans are unsecured loans)
Avant offers an efficient and quick online loan application that yields a decision within minutes. Funding is quick, and borrowers often have access to their money as soon as the next business day. Refinancing to a higher loan amount and potentially reduced interest rate may be possible after nine months of on-time payments
The administration fee, which is similar to an origination fee, is deducted from the loan proceeds at the time of funding. This can be problematic for borrowers with poor credit as they are more likely be required to pay the full 4.75% administration fee and may not receive the full lump sum they need.
Rates & Fees
- Rates: 9.95% to 35.99%
- Repayment Terms: 2 to 5 years
- Loan Amounts: $2,000 to $35,000
- Fees: Administration fee of 4.75%
- Valid ID and checking account
- No minimum credit score, but most approved applicants have a score between 600 and 700
- Gross annual income of at least $20,000
Oportun is designed specifically for borrowers with poor or nonexistent credit. Since the lender reports to two major credit bureaus (Experian and TransUnion), borrowers who make regular on-time payments can improve their credit score while they finance their home improvement project. Oportun also offers customers access to financial education and counseling.
One of the primary downfalls of an Oportun loan is limited funding, as approved loans will not exceed $9,000. For some, the loan amount may not cover the full price of their home improvement project.
Further, since Oportun is only available in 12 states, many consumers will not have access to a loan through this lender.
Rates & Fees
- Rates: Not provided
- Repayment Terms: 7 to 46 months
- Loan Amount: $300 to $9,000
- Fees: Late fees apply
- Valid ID, proof of residency, proof of income
- Must reside in one of the following 12 states: Arizona, California, Florida, Idaho, Illinois, Missouri, New Jersey, New Mexico, Nevada, Texas, Utah, and Wisconsin
Choosing a Home Improvement Loan if You Have Bad Credit
Previously, it was extremely difficult to find a home improvement loan if you had bad credit. But as the online lending market grows, there are more options for borrowers who may have below-average credit. Though the options are still not as plentiful as those for borrowers with good or excellent credit, qualifying for a loan is far easier.
That said, finding the right loan can be an exhaustive process when it comes to evaluating terms, rates, and other factors to find the most affordable product for your needs. Here are a few things to keep in mind as you shop around:
Interest rates are the biggest indicator of loan affordability, so it’s important to compare your options. Many lenders provide personalized rates through a soft credit inquiry, which allows you to compare rates without damaging your score with a hard credit pull. However, this is not the case for all lenders, so find out which kind of credit inquiry will be made before submitting your information.
>> Read More: Hard vs Soft Credit Inquiries Explained
The longer your loan term, the more interest you’ll pay over the life of the loan. However, shorter loan terms typically mean higher monthly payments, so you’ll need to weigh those factors carefully. Select a term that will result in a manageable payment amount that fits in your budget, as late payments will further damage your credit score.
In many cases, home improvement loans for borrowers with bad credit will include origination or administration fees. Always factor this fee into the total cost of the loan when comparing lenders.
Further, it’s also important to find out when and how the fee will be applied. Some lenders will take it out of the principal balance at the time of origination while others will add it to your payments.
>> Read More: Common Personal Loan Charges and Fees
Bad credit often makes borrowers vulnerable to predatory lenders. As such, it’s helpful to do some research before committing to a loan agreement. Check customer reviews or use websites like LendEDU to find out more about your potential lender.
Home Improvement Loan Application Process
Many of today’s lenders offer online applications that can be completed from the comfort of your own home. You’ll likely be required to provide the following:
- Valid ID
- Proof of income (tax returns or paystubs)
- Valid address, phone number, and email address
- Bank account information for funding purposes
If you have bad credit, you may find that lenders require you to provide additional information or go through additional steps, like meeting with a loan counselor.
In some cases, you may also find that you can improve your odds of approval by adding a qualified co-signer to the loan application or be choosing a secured loan, which will require you to put up collateral (e.g., car, home, boat, etc.). Of course, both scenarios carry their own set of risks, so it’s important to weigh your options and understand the potential implications should you default on the loan.
Alternatives to Home Improvement Loans
Home improvement loans aren’t the only funding option available, and as you consider your options, you may want to look into the following alternatives.
Home Equity Loan
This type of loan allows you to leverage your home equity to secure the funds necessary for your improvement project. There are lenders who provide home equity loans for bad credit, and since it’s considered secured debt, you may find that approval odds are higher and rates are lower, although risk losing your home if you become unable to make payments.
In most cases, you’ll need to have at least 15% to 20% equity in your home before you can apply for a home equity loan or home equity line of credit.
In some cases, you might be able to use a credit card to fund your home improvement project; however, you may find that not having good credit can cause similar roadblocks to when it comes to securing approval.
If you do choose a credit card, be sure your interest rate is lower than what you’d get with a personal home improvement loan. Furthermore, applying for a credit card always results in a hard inquiry, which can further lower your score. As such, it’s beneficial to research a few credit cards for bad credit before you apply.
Depending on the cost of your home improvement project, you may not find a card with a sufficient credit limit to afford what you want to do.
Improve Your Credit Score
Home improvements aside, improving your credit score is generally a smart idea regardless of an immediate need for credit. It will allow you to take advantage of better rates and terms and can make financing any purchase or project easier and more affordable.
In some cases, you may need to start on a project or replace a major appliance immediately, leaving you with little time to address your credit score. However, if you can delay your home improvements for a few months, you may be able to raise your credit score just enough to improve your odds of being approved and securing a lower interest rate.
The following steps can help you improve your score:
- Request and review a copy of your credit report, ensuring all information is valid and contesting anything that looks wrong or inaccurate.
- Pay your bills on time, every time.
- Decrease your credit utilization by paying down debt.
- Use credit cards responsibly. Credit cards can improve your credit by increasing the total credit availability, but only if you use them responsibly and keep your overall balances low.
Securing a personal loan with bad credit, including a home improvement loan, can be difficult. However, there are numerous online lenders that offer loans specifically designed for borrowers with less-than-perfect credit histories. The key to finding the right one is reviewing the rates and terms available and understanding how the loan payment will factor into your monthly budget.
In some cases, particularly if the repairs don’t need to be made immediately, it may be best to hold off as you take steps to improve your credit in hopes of improving your odds of approval and securing better loan terms later.
Author: Jennifer Lobb
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