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5 Best Home Improvement Loans of 2022
By Kat Tretina MONEY RESEARCH COLLECTIVE
Compare quotes from multiple lenders. Get $200 if you find a better rate elsewhere.
$600 - $100,000
12 to 84 months
6.49% - 35.99%
Undisclosed
Offers some of the longest loan terms in the market. If you’re not satisfied after closing, you get $100.
5,000 to 100,000
2 - 12 years
6.94 - 25.29%
660
Offers a lower APR than most credit unions and allows non-military consumers to apply.
$600 to $50,000
12 to 60 months
6.74 % to 17.99%
650
Whether you’re removing popcorn ceilings, adding a full bathroom to the first floor or replacing drafty windows, home repairs and renovations can be expensive. Between supplies and labor, the total can add up quickly. If you’re planning on undertaking a home improvement project, you may need to borrow money to cover the cost.
Several different types of loans are available for home improvements, including home equity loans and home equity lines of credit (HELOCs). However, these forms of credit require you to have equity in your home — which not everyone may have — and use your house as collateral.
A better option may be a personal loan specifically designed for home improvements. Personal loans are usually unsecured, meaning they don’t require any collateral. This makes them a good option for borrowers who don’t want to put their homes at risk if they can’t afford their payments.
We researched leading providers of home improvement loans and identified the five best lenders to help you finance your next home improvement project.
Our Top Picks for the Best Home Improvement Loans
- Best Overall: Lightstream
- Best for Secured Loans: First Tech Federal Credit Union
- Best Loan Marketplace: Credible
- Best for Small Projects: PenFed Credit Union
- Best for Less-Than-Perfect Credit: Avant
Best Home Improvement Loans Reviews
Best Overall: LightStream
Why we chose it: Of all the lenders we evaluated, Lightstream had the lowest-possible interest rates — rates start at just 4.99% with the autopay discount — and the longest repayment terms. It also backs its home renovation loans with a satisfaction guarantee.
- High loan limits
- Quick loan disbursement
- Longer-than-average repayment terms available
- Low rates
- Excellent credit required
- No prequalification option
- High loan minimum
Through Lightstream, you can borrow between $5,000 and $100,000. The minimum loan amount is higher than that of other lenders, so it may not be the right choice for smaller home improvement projects. Loan terms on these fixed-rate loans also go up to 10 years, far longer than other lenders allow.
If you’re approved for a loan, you can receive the money in a lump sum as soon as the same day you apply, making it a convenient option if you have an emergency home repair to complete.
Borrowers with excellent credit can qualify for lower-than-average interest rates with Lightstream. Additionally, the company doesn’t charge origination fees and offers autopay discounts to reduce the cost of borrowing. However, borrowers with poor to fair credit are unlikely to qualify for a loan, and Lightstream doesn’t have a prequalification option. The only way to check your eligibility is to apply and consent to a hard credit inquiry, which can cause your credit score to drop.
Best for Secured Loans: First Tech Federal Credit Union
Why we chose it: Those with less-than-stellar credit scores can use a First Tech Federal Credit Union secured loan to improve their chances of getting approved for a loan and qualifying for a lower rate.
- Low APRs
- Wide range of loan amounts
- Loan terms as long as 12 years
- Requires collateral
- Must be a credit union member
- No loan prequalification
While most personal loans for home renovations are unsecured, First Tech Federal Credit Union is one of a few lenders offering a secured option. Opting for a secured home improvement loan can increase your odds of approval, and you may be able to borrow more money than you would with an unsecured loan. This is a useful option if you have costly upgrades planned.
You can secure your loan with stocks, share certificates or your bank account balance. Repayment terms may be as long as 12 years — much longer than most loans — and could result in a lower monthly payment.
Because First Tech Federal Credit Union’s loans are secured, you risk losing your collateral if you fall behind on your payments. And to qualify for a loan, you must be a credit union member and meet the institution’s credit score requirements. The lender doesn’t have a prequalification tool, so there’s no way to check your eligibility without affecting your credit.
Best Loan Marketplace: Credible
Why we chose it: Credible makes it easy to compare home improvement loans and find the best rates through its simple online platform.
- Quickly compare loan offers
- Loan options for less-than-perfect credit
- Range of loan amounts
- Not partnered with all leading lenders
- Fees vary by lender
- Some lenders charge high APRs
Credible an online marketplace that allows you to fill out one form to connect with leading financial institutions and non-bank lenders. Once you find a loan that works for you, Credible will redirect you to the lender’s website to complete the loan application.
Since Credible partners with different financial services providers, you could be matched with lenders that accept lower credit scores and offer loan amounts between $600 and $100,000 — depending on the company.
Credible doesn’t partner with every leading home improvement loan lender, so there may be some major players that aren’t on the Credible platform. APRs and fees vary by partner. For example, some don’t charge origination fees, but others do, so carefully review the loan agreement and disclosures to know the costs involved in borrowing.
Best for Small Projects: PenFed
Why We Chose It: While many home improvement loan lenders have minimums of $2,500 or more, PenFed Credit Union’s minimum loan amount is just $600. The lower minimum allows you to borrow what you need for smaller projects and avoid unnecessary debt.
- Minimum is just $600
- No origination fee
- Quick prequalification process
- Limited repayment term options
- Lower loan maximum than competitors
- Must join the credit union
Not all home renovations cost thousands of dollars. If you need a loan to cover the cost of smaller projects — such as replacing appliances or painting the interior of your home — PenFed Credit Union offers loans between $600 and $50,000, and it doesn’t charge origination fees or prepayment penalties.
PenFed has an easy-to-use tool that allows you to prequalify for a loan online, and the application process is quick. The credit union claims funds can be in your account the next day after approval.
The maximum loan term available is five years, shorter than other lenders offer. And you must join PenFed Credit Union to qualify for a loan. However, membership is open to the general public. You can join by depositing just $5 to open a savings account.
Best for Less-Than-Perfect Credit: Avant
Why we chose it: While many home improvement loan companies require borrowers to have good to excellent credit, Avant has lower credit score requirements, making loans more accessible.
- Lower credit score requirements
- Loan prequalification tool
- Limited loan amounts
- Limited repayment term options
- Charges administration fee
If you don’t have good credit, it can be difficult to qualify for a loan. Many home improvement loan lenders require scores of 670 or higher. By contrast, Avant’s typical customer has a score between 600 and 700. A 600 credit score is in the “fair” credit range, which is lower than most lenders accept.
With Avant, you can borrow between $2,000 and $35,000, and loan terms range between 12 and 60 months. Avant also has an online prequalification tool that allows you to find out if you’re eligible for a loan and view loan options without affecting your credit.
Keep in mind that Avant loan rates may be higher than you can find elsewhere. Additionally, it offers a lower maximum loan amount and shorter repayment terms than other lenders. There is also an administrative fee that can be as high as 4.75%.
Other Companies We Considered
While those above companies are the top five out of the lenders we evaluated, two other companies are worth your consideration.
- Rocket: For those that need money quickly to pay a contractor or cover an emergency home repair, Rocket offers loan disbursement as soon as the same day you apply. However, it does charge origination fees and has limited loan repayment options.
- SoFi: Although SoFi’s lowest APR is higher than some of the lenders on our list, it offers loan amounts between $5,000 and $100,000, and you can have up to seven years to repay the loan.
Home Improvement Loans FAQ
Which loan is best for a house that needs improvements?
If you need to finance a home renovation project, you can use the following options:
- Home equity loan: Home equity loans allow homeowners with sufficient home equity to borrow against that equity. Your home serves as a collateral, so you may qualify for a lower interest rate than you'd get with an unsecured loan. The best home equity loans offer competitive rates and different repayment options.
- Home equity line of credit (HELOC): HELOCs also allow you to borrow against the equity in your home, but are revolving lines of credit you can utilize again and again.
- Unsecured home improvement loan: Home improvement loans are unsecured personal loans you can use to pay for home repairs or renovations. They're best for homeowners who haven't built equity yet or aren't comfortable using their homes as collateral.
The best loan type depends on the amount of equity you've established in your home, the cost of your planned repairs and your credit history.
Is a home improvement loan the same as a mortgage?
Home improvement loans are different from mortgages. Mortgages are used to purchase a home or to refinance an existing home loan. They usually have repayment terms of 15 or 30 years, and the house secures the loan.
Home improvement loans are used to pay for repairs or renovations. They're typically unsecured, so your home doesn't serve as collateral. Home improvement loans are usually faster to process than mortgages; you can get the funds within a day or two of applying, whereas a mortgage can take weeks to close.
Which bank is best for a renovation loan?
We researched home improvement loans from 25 different lenders and identified Lightstream as the best overall lender. It offers the lowest interest rates and longest repayment terms of all the unsecured loan lenders we evaluated, and you can borrow up to $100,000. Plus, it disburses loans quickly; you could receive your funds as soon as the same day you apply.
What is an FHA 203(k) loan?
An FHA 203(k) loan is a government-backed product that allows you to purchase a home and finance renovations in one loan. It's intended to help people with low to moderate incomes afford to buy and improve homes in disrepair.
What are the requirements for obtaining a renovation loan?
Credit score and income requirements can vary by lender, but you typically need good to excellent credit — meaning a score between 670 and 850 — and a reliable source of income. Lenders will also look at your debt-to-income ratio (DTI), a measure of how much of your income goes toward debt each month, to ensure you can afford the new loan.
What is the difference between a home improvement loan and a mortgage?
There are several key differences between mortgages and home improvement loans:
- Collateral: With a mortgage, your home secures the loan. If you default, the lender can begin foreclosure proceedings against you, putting your home at risk. With a home improvement loan, the lender decides whether to approve your application solely based on your credit. And they don't have collateral, so there is no risk of losing your home.
- Repayment terms: When you take out a mortgage, repayment terms are generally 15 to 30 years. With unsecured home improvement loans, repayment terms are much shorter — typically two to 12 years in length.
- Interest rates: Since home improvement loans are unsecured, they tend to have higher, typically fixed interest rates. Mortgages, on the other hand, usually feature lower interest rates, and these can be adjustable or fixed rates.
- Disbursement time: On average, mortgages take 49 days to close. By contrast, some home improvement loan lenders will disburse your loan funds as soon as the same day you obtain loan approval.
What are the best things to do before applying for a renovation loan?
Before taking out a renovation loan, follow these steps:
- Check your credit: If you're considering taking out another loan, check your credit reports at AnnualCreditReport.com to ensure your information is accurate and up to date. If there are any issues, dispute them with the credit bureaus.
- Request estimates: Meet with potential contractors and request estimates for your planned projects. Make sure the estimates include supplies, labor and any permit costs.
- Consider your options: Depending on your situation, you may have several financing options to choose from, including home equity loans, HELOCs, low-interest credit cards or home improvement loans.
- Shop around: If you decide that a home improvement loan is the best option, shop around and compare quotes from multiple lenders to find the lowest rates.
What is the best way to get a loan for home improvement?
The best way to get a loan for home improvement projects is to shop around and compare quotes from leading lenders. Many lenders offer prequalification tools, so you can check your eligibility and view possible rates without affecting your credit score.
Most lenders have an online application, so there's no need to visit a local bank branch. If your application is approved, some lenders will disburse the funds the next business day or as soon as the same day you apply.
How much is the average home improvement loan?
The amount of the average home improvement loan is dependent on your location and planned project.
According to the National Association of Realtors' 2022 Remodeling Impact Report, these were the average costs of common remodeling projects:
- Bathroom renovation: $35,000
- Closet renovation: $6,000
- Complete kitchen remodel: $80,000
- New roofing: $12,000
- New wood flooring: $5,500
How We Found the Best Home Improvement Loans
We researched 25 leading home improvement loans offered by banks, credit unions and online lenders. We evaluated each lender on the following factors:
- Annual percentage rates (APRs)
- Credit and income requirements
- Customer service and reliability
- Loan amounts
- Origination fees, administration fees and late fees
- Repayment terms
Although rates vary based on the applicant’s credit profile, the top lenders we chose had the most competitive interest rates, longer-than-average repayment term options and excellent ratings for customer support.
