SuperMoney's list of the best-rated personal loans for home improvement loans is dynamically generated based on advanced algorithms and community feedback. When searching for a personal loan for home repair and improvment projects, we focus on lenders that offer large loan amounts and competitive rates.
Common Questions on Home Improvement Personal Loans
How does a home improvement loan work?
A home improvement loan is not a single type of loan. Instead, it describes the purpose of the loan. You can use a home improvement loan to finance a home improvement, repair damage after a natural disaster, replace your roof, or make any other upgrade to your home. There are two types of home improvement loans: secured and unsecured.
A secured loan, such as a home equity loan, home equity line of credit (HELOC) or cash-out refinance, require you to put your home up as collateral. This puts your home at risk. The lender can force you to foreclose on your home if you don't make payments on the loan.
Unsecured loans, such as personal loans, don't require you to provide your home as collateral. However, interest rates are typically higher and the loan amounts available are smaller.
When you get a personal loan for home improvement projects, you're borrowing to upgrade your home. But because it's a personal loan, you can use the money for anything. There are no restrictions.
What are the pros and cons of a home improvement personal loan?
Around 64% of Americans are homeowners, so it's no surprise that so many people are searching for the best possible deals in home improvement financing. Home improvement loans are one option available to homeowners, but there are alternatives to consider. Here are some of the pros and cons to consider when deciding which is the best option for you.
Benefits of using a personal loan to finance a home improvement
The main advantage of personal loans over home equity loans and HELOCs is they don't put your home at risk. Personal loans also offer the flexibility of being able to use the money for whatever purpose you want. There are no restrictions. Another advantage is that eligibility does not depend on the equity you have built in your home. Lenders determine whether you are eligible for a home improvement personal loan based on other factors, such as your credit score, credit history, and debt-to-income ratio. If you only need a modest amount (less than $30,000) it might make sense to use a personal loan.
Disadvantages of using home improvement personal loans
Home improvement loans are typically used as an investment. The hope is the money you spend on the project will increase (or maintain) the value of the home. However, there is no guarantee it will work as planned. As with any loan, there is the risk your financial circumstances change and you are forced to default on the loan. That could seriously damage your credit. Typically, personal loans also have higher interest rates than home equity lines of credit and home equity loans.
Can I get a home improvement loan with poor credit?
Having a poor credit score will definitely make it harder to qualify for a home improvement personal loan. However, there are still options for people with bad credit, but the interest rates will be much higher. Homeowners with bad credit can also consider other options, such as home equity lines of credit
and shared equity agreements.
I just bought a house, can I get a home improvement loan?
Yes, you can get a personal loan for home improvements at any point, even when you've just bought the house. Lenders will consider other factors, such as your credit score and debt-to-income ratio, when determining whether you qualify for a personal loan. How recently you bought a home is not usually a factor.
Are home improvement personal loans secured or unsecured loans?
Home improvement loans can be secured or unsecured. The personal loans in the list above are unsecured term loans. Typically, unsecured loans have higher interest rates than secured loans, such as home equity line of credit (HELOC) and home equity loans. However, if you default on payments for any reason, the lender can sell your house to cover the debt.
How are home improvement loan rates calculated?
Like other types of personal loans, home improvement loan rates are a percentage of the loan amount. However, your exact rate will depend on several factors, such as your credit score, the amount borrowed, and how much debt you carry.
Do home improvement personal loans have a fixed or variable interest rate?
Most personal loans have a fixed interest rate for the life of the loan. This means payments are the same every month. In the case of variable rate loans, the payments can change based on the market rate.
Is a personal loan for home improvements a good idea?
It depends on your financial circumstances and what other options you have. A home improvement loan can give you the funds to increase or preserve your home's value. However, personal loans can sometimes be more expensive than secured options, such as home equity loans and home equity lines of credit. On the other hand, they don't put your property at risk if you miss payments.
If a home renovation project is on your horizon, the list of best-rated personal loans for home improvement above is a good place to start.