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Best Home Improvement Loan Rates: No Equity or Bad Personal Credit Ok?

Updated: October 2019
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Best Home Improvement LoansA home improvement loan is a loan you use to fix your home. You can use the loan to do repairs, maintenance, or remodel. Some people get home improvement loans because they don’t have the cash on hand to do repairs that need to be done. Other people get a home improvement loan because they want to remodel or improve the home, they live in. A home is a huge investment and if you aren’t planning to pay for repairs or upgrades in cash, you may eventually need a home improvement loan.

Table of Contents

A Home Improvement Loan: The Details

A home improvement loan is a loan that is unsecured, and it is a personal loan rather than a mortgage. Your home is not collateral for a home improvement loan, so you don’t have to worry about risking your home to get the loan. Most of the time there is no collateral for a loan for home improvements. There are other loans that people get for improving their home that does rely on equity from the home, but these are not called home improvement loans. Some will obtain a home equity line of credit or refinance a mortgage to get major repairs done.

A home improvement loan has less of a time frame than a mortgage or even some car payments. Paying back the loan usually takes three to five years, unless it is for a large amount. These payments are made in monthly payments. Loans range from $1,000 to $100,000. Interest rates for a home improvement loan depend on your credit rating and can range from 3% to 18% or more for interest rates. The higher your credit score, the less your interest rate on your loan is. If you have the time and can spend time increasing your credit score, you may save a lot of money on interest for your loan.

Home improvement loans are issued fast. Most of the time it is within a week of your application. You can obtain a home improvement loan at a bank, credit union and personal loan providers.

Best Home Improvement Loans

Why is a Home Improvement Loan a Good Option?

Many times, there are several ways to finance a home improvement project. A home improvement loan is one choice among many. The amount you need when you go to borrow money may be the deciding factor. If interest is a concern and repairs aren’t urgent, you may be able to save the money and pay for the repairs in cash. This is usually the best choice because debt isn’t lingering. Most people can’t afford a lump sum of cash to come out of a budget for home improvements, so they look for alternatives.

Credit cards are a possibility, but they have high-interest rates and aren’t as stable as a home improvement loan. A home improvement loan also doesn’t have a variable rate. The probability of paying off the loan before the credit card balance is high.

Another choice to fund home improvements is a home equity line of credit or a HELOC. Many people in the mortgage and real estate industry will use the term HELOC because they are popular for those who improve their homes. A home equity line of credit is not a lump sum, it is a line of credit you can draw on as you need the funds. A HELOC offers bigger opportunities to do large projects because it offers the ability to draw more money. Your home becomes collateral for the HELOC, so it is at risk if you don’t pay your loan. The interest rates for a HELOC are based on global interest rates and aren’t fixed. A personal loan doesn’t put your home at risk, and they offer you a fixed interest rate.

A home improvement loan tends to be the best choice if you want your money fast. You may have to apply for a credit card and wait for it to show up or apply for a home equity line of credit which can take a while to hear an answer and get access to the line of credit. A personal loan can provide you with the funds you need faster than almost any other loan or line of credit.

Reviewing the Funding Sources for Home Improvement Financing

Cash

  • Pros: Easier than anything else.
  • Cons: Most people don’t have a large amount of cash on hand, or they must use a large amount of savings.

Credit Cards

  • Pros: They are easy to get if your credit is good.
  • Cons: Interest rates are high. Harder to pay the balance off. A hard pull on your credit could lower your score, whether you get approved or not.

Home Equity Line of Credit

  • Pros: Low-interest rates.
  • Cons: Your home is used for collateral. Debt.

Personal Loan/Home Improvement Loan

  • Pros: Interest rates are competitive and fixed. Payments are fixed. Fast.
  • Cons: Debt
Best Home Improvement Loans

How is a Home Improvement Loan Used?

A home improvement loan is a personal loan, so you can use it for anything you want. While the loans are intended to improve your home, you have no requirements on how you spend the funds. If you wanted to buy furnishings or use it to pay down some of your debt, you can use it for these things. If your improvements increase the value of your home, this is usually the best way to spend the money. If you plan to sell your home, you can do improvements that the real estate agent suggests and fund staging expenses. If the idea is to increase the value of your home, it might be helpful to look at the other homes in your area and compare them to your home. This may tell you what needs improving the most, so you can focus your funds toward the biggest return on your investment.

The most popular way to improve a home is to remodel or improve a kitchen. New appliances, countertops, and flooring are all expenses that add value to a home. An addition is also a project people fund with a home improvement loan. Adding a bathroom or bedroom will help a homes value increase, especially if it is a small home. Updating the flooring in a home is an easy project if you want to take out the carpet and install hardwood flooring. Investing in these upgrades can help the value of a home if you ever decide to sell.

Improvements to a house aren’t always remodeling or making it a nicer place to live. Some improvements are necessary or even urgent because of the weather. These improvements include replacing appliances that stop working. A water heater or broken oven may need attention right away. If you don’t have the money on hand, a personal loan can help you get these things and get back to an excellent quality of life.

Improvements can also include fixing or replacing windows before winter hits. Roof repair is expensive and if it leaks, or you live in a cold climate, it is important to keep up with the maintenance. You may want to add insulation to your garage or finish a basement for more space. While these jobs seem like they are small, the expense can increase throughout the project. If you are mid-project and need more funds, a home improvement loan can help you get back to work.

There may be other things you’d like to buy to make your home into a space that reflects your personality. This can be art or furnishings. You may also want to turn a bedroom into an exercise studio or remodel a living area to be a functional library. Adding personalized rooms to homes is a trend that many are interested in because it allows one to relate the things, they love to do to the space they call home. If you want to enjoy your home more, changing a room to reflect your passion in a hobby may make it the home you’ve always wanted.

What is the Application Process for a Home Improvement Loan?

It is easy to apply for a home improvement loan on the internet. There are many products available from private lenders that have a quick application process and a quick timeframe to receive your funds. While you can apply for a personal loan at a bank, it is harder if you can only apply during certain hours and you have obligations.

Applying for a loan online is extremely easy and you will know everything upfront. You will see the fees, interest rates, and know what your payments are. You will have the opportunity to read the terms and conditions of the home improvement loan, prior to submitting your application. A pre-approval is a good step in giving you the information to help you decide on a loan or not. These usually don’t do a hard pull on your credit and affect your credit score. A full application will do the hard pull on your credit, but you should have a great idea if you will be approved and for what amount prior if you do a pre-approval. This step helps protect your credit score.

Best Home Improvement Loans

What are the Qualifications for a Home Improvement Loan?

Credit is a big deciding factor in any loan. A home improvement personal loan is determined by looking at several things in your history, not just credit. You should have a strong employment history and a steady income. Your income should also be enough to pay your bills, debts, and your new loan. Managing your debts is important and a lender will review your ability to pay on time. Most lenders will need your personal information, a statement of your annual income, your loan history, how much money you have in investments and savings, and how much you want them to loan you. Once you send your information the wait is not long at all.

After the Application

Once your application is done, the next steps depend on the lender. You could have an answer right away or in several days. Private lenders are usually fast, and you have an answer almost instantly. If you are applying for a loan online, you could have an answer and the funds in just a few days.

Your credit score is important and is directly compromised based on the number of times you apply for a loan. It is important to work with lenders that offer a pre-approval and soft-pull of your credit report. A hard-pull can bring your score down many points. If you apply to more than one company, this can mean a significant impact on your credit score.

When you get your money, make sure you have a copy of your payment schedule and where or how to make your payments. Paying on time is important as you can increase your credit score with on-time payment histories.

If you didn’t get an acceptable offer from a lender, for example Sofi Loans, put a little work into your credit score to see if that helps. Sometimes paying off old debt or asking someone to report your on-time payments can go a long way. Lenders may also let you know why you weren’t approved for the amount you wanted or anything at all if you ask. Then, you can work on fixing the problems and reapply later.

Since you’re a homeowner, you can also look at equity financing. Find out the differences between home equity loan vs line of credit so that you can take advantage of it. 

FAQ

How Home Improvement Loans Work

Home improvement loans work through giving you the funds to make changes to your property. These loans range in interest rates and costs depending on the type of loan you receive. Check out the answers to questions on how home improvement loans, how they work, and what they can be used for.

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How do home improvement loans work?

There are different types of home improvement loans, such as a mortgage refinance loan or home equity loan. These loans allow you to make repairs or changes to your property if you agree to make monthly payments.

What is a home improvement loan?

A home improvement loan works by receiving money from a lender and using it to make major improvements or repairs to your property. There are different types of loans to choose from, such as a home equity loan or personal finance.

How long are home improvement loans?

The length for a home improvement loan depends on the type of loan you receive. A personal loan typically has a two to five-year payback period, but a home equity loan can have a payback period range from five to 30 years.

How to add home improvement loan to mortgage?

Apply to a mortgage lender for a cash-out refinance. This type of loan allows you to add the cost of home improvement to the remaining balance of your mortgage and end up with a mortgage that covers all the costs.

How to get a home improvement loan with poor credit?

Personal loans, home equity loans, and even government-backed rehabilitation loans are all available to people with poor credit. If you have a low credit score, the interest rates for these loans may be higher than average.

Is it hard to get a home improvement loan?

The ease or difficulty of getting a home improvement loan depends on multiple factors, such as your credit history and the lender you choose. Many lenders prefer a borrower with a history of paying their debts on time and consistently.

How much is a home improvement loan?

The cost of a home improvement loan varies based on how much you borrow, your credit score, and the lender you lose. To get the most accurate cost of your loan, receive a quote from your lender. If you’re just wanting a small amount that you intend on paying back quickly then even a cash advance online would work for that purpose.

Should I get a home equity loan for home improvements?

It can be a good idea to use a home equity loan for home improvements. The loan can be added to your mortgage and it has tax benefits and a lower interest rate. If you aren’t borrowing a large amount though, consider other loan types.

What credit score is needed for a home improvement loan?

Typically, a FICO credit score of 620 or higher is needed for a home improvement loan. There are some lenders that offer loans to people with lower credit scores, but interest rates tend to be higher in these situations. Sometimes people will use credit repair companies to increase their scores.

Where can I get a home improvement loan?

Multiple lenders offer home improvement loans. You should search for the best loan for you, but many financial institutions offer some form of home improvement loan or personal loan to use for the same purposes.

Are home improvement loans a good idea?

A home improvement loan is a good idea to those who need cash to make significant changes to their home. These loans are particularly good for those with a good line of credit and the means to pay off the loan. Treat this as an investment and you are increasing the value of your investment. This is also a good way to start investing for beginners with little money.

How easy is it to get a home improvement loan?

It can be easy to get a home improvement loan if you have a good credit score and credit history. Even with a poor credit score, some lenders still offer loans to borrowers, but the costs may differ.

How long can you finance a home improvement loan?

The type of loan determines how much time you have. A home improvement loan can be anywhere from 12 to 84 months, but if you choose an alternative, such as a personal loan, then you may only have five to seven years to pay it off.

How to qualify for a home improvement loan?

If you wish to qualify for a home improvement loan, you need to have your financial affairs in order and maintain a credit score over 600. A good credit history increases the chances of you qualifying and receiving a loan with low interest rates.

What is an FHA home improvement loan?

An FHA home improvement loan, also known as a renovation loan, gives homeowners and homebuyers the ability to finance the refinance the purchase and renovation of a home through a mortgage. 

Is a home improvement loan a second mortgage?

A home improvement loan is not a second mortgage, but it can be used to adjust your mortgage. If you get a home equity loan, the loan will be added to your mortgage and adjust your payments.

What can you use a home improvement loan for?

You can use a home improvement loan to make any changes or adjustments to your property. These can be simple improvements and fixes or extreme remodels and additions to your home.

What is the current interest rate for home improvement loans?

Interest rates vary significantly depending on the type of home improvement loan you receive. Some rates are less than credit card rates while others can range anywhere from 2.5 to 36 percent.

Can first time home buyers get a home improvement loan?

Yes, you can buy a home and finance the improvements, repairs and renovations in the same mortgage. This is commonly done with an FHA loan that considers the cost of the home and work.

Can you get a loan from 401k for home improvement?

Yes, you can borrow money from your 401k for any reason, which includes funding a home improvement project. Most of these programs allow you to borrow up to $50,000 or half your balance, whichever is the lower amount.

Can veterans get FHA home improvement loans?

Veterans have two types of loans for home improvement available to them through Veterans Affairs. These loans are a cash-out refinance loan and a renovation loan. Borrowers must find a lender that offers these loans in order to apply.

Can you get a home improvement loan for a pool?

Yes, you can get a home improvement loan for a pool. The two types of loans that work best for a pool include a home equity loan and a personal.

Can you refinance a home improvement loan during construction?

You can refinance your home improvement loan during construction, but it may depend on your loan type and the lender you’ve chosen. Reach out to your lender to specifically find out what your options for refinancing are.

Can you use VA loan for home improvements?

Yes, Veterans Affairs does provide homeowners with loans for home improvements. There are two loans homeowners can choose from and they come with benefits to help reduce the overall costs of the loan.

Do home improvement loans have closing costs?

Some loans used for home improvement, such as home equity loans, HELOCs, and Title 1 loans require you to pay interest and closing costs. Not all loans have closing costs for home improvement projects.

Applying for Home Improvement Loans

Multiple lenders provide home improvement loans. There are different ways to apply for one and different loans have varying limits. The following answers questions regarding the type of loans you can get for home improvement projects.

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How to apply for a home improvement loan?

In order to apply for a home improvement loan, you need to reach out to a lender and ask to borrow the amount you need. There is a lot to consider when asking for a loan, such as your credit history, loan-to-value ratio, and your debt-to-income ratio.

What type of loan should I get for home improvement?

There is no one loan type that is better than the other. One of most common types of loans is an FHA loan. The reason why this loan is popular is because they have a low down payment and credit score requirement.

What kind of loan can I get for home improvements?

The following loans can be used for home improvements: Fannie Mae HomeStyle loan, FHA loans, home equity loans, and cash-out refinancing. Other loan types do exist, but these are among the most popular.

How to get a home improvement loan?

You can apply for a home improvement loan through various lenders, such as Regions Mortgage, BB&T, and Navy Federal Credit Union. The interest rates on your loan depend on your credit score.

How to apply for a VA home improvement loan?

In order to apply for a VA home improvement loan, a borrower must find a lender offering the loan they want to apply for. There are two types of loans, a cash-out refinance loan and a renovation loan.

How to get a home improvement loan without equity?

You can get a personal loan, which are based on your credit score, credit history and creditworthiness. You can also get a Title I Property Improvement loan if you need to borrow $7,500 or less.

Can I get a home improvement loan?

In order to be eligible for a home improvement loan, you must have a good credit score or equity. The limit of your loan is based on the type of loan you get and the value of your property.

Does USAA offer home improvement loans?

Yes, USAA does offer home improvement loans. The USAA home improvement loans have no origination fee on loans of up to $20,000 and offers terms that range from 12 to 84 months.

What is the best loan to get for home improvements?

Regions, BB&T, Navy Federal Credit Union, LendingClub, Avant, and Upstart are all companies that offer good home improvement loans. The benefits of the loan vary based on the lender you choose to borrow from.

What types of loans are available for home improvements?

Some of the most common types of loans for home improvements include the following: mortgage refinance loans, home equity loans, personal loans, etc. Some specific loans are available for certain people, such as VA loans.

Does Quicken Loans do home improvement loans?

Quicken Loans provides an alternative to home improvement loans with a cash-out refinance loan. This loan changes your mortgage adjusts it based on the amount of the loan and costs associated with it.

Does Capital One give loans for home improvements?

Capital One does not offer loans for home improvements. In fact, Capital One doesn’t offer any other personal loan types for renovations, and suggests reaching out to other lenders for the service.

Does Chase Bank do home improvement loans?

Yes, Chase Bank offers several loans, which includes a home equity loan to pay for home improvements and other costs. You can reach out to a Chase Home Lending Advisor to apply.

Does Home Depot do home improvements loans?

Yes, known as the Home Depot Project Loan, Home Depot gives you funds to help you with your home improvement projects. This loan is available with a high credit limit for long-term financing.

Does Navy Federal offer home improvement loans?

Yes, Navy Federal does offer home improvement loans to people eligible. The loan types that Navy Federal offer include personal loans with a max amount of $50,000 and term limits of up to 60 months.

Does PennyMac offer home improvement loans?

PennyMac does offer a cash-out refinance loan for homeowners. This loan can be used to make improvements to your home and the loan is added to your mortgage to reflect the cost.

Dealing with Home Improvement Loans

Home improvement loans come with a lot of responsibility. You can help reduce the costs of these loans and deduct them from your taxes. Check out these answers to questions about writing off home improvement loans and how it impacts your credit.

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Can you deduct interest on home improvement loans?

You cannot deduct how much you spend on your home improvements from taxes, but you can, in fact, deduct the loan interest. Starting in 2018, you can deduct the interest of up to $750,000 if you file jointly and $375,000 when filing separately.

How to improve credit for home loan?

Some of the ways you can improve your credit for a home loan include disputing inaccurate information, paying off delinquent accounts, making timely payments on your delinquencies, and reducing your debt to income ratio.

Is a home improvement loan tax deductible?

A home improvement loan itself is not tax deductible, but the interest you pay on the loan can be deducted from your taxes. This limit is increased if you are filing jointly.

Can you add home improvement loan to mortgage?

Yes, you can add your home improvement loan to your mortgage with a cash-out refinance. This replaces your original mortgage with a new one that reflects the costs of your home improvements.

Are CD secured home improvement loans HMDA reportable?

A CD secured home improvement loan is only reportable to the HMDA if the purpose is for home improvement and the lender internally classifies it as a form of home improvement.

Are home improvement loans for rental property deductible?

Yes, if a landlord takes out a loan to improve a rental property or cover the other property then the interest payments the landlord makes on the loans is tax deductible.

Are unsecured home improvement loans HMDA reportable?

No, only home improvement loans secured are reported. Small, unsecure home improvements loans are eliminated from the HMDA record. These are the loans that lenders typically use to serve lower-income homeowners.

Are unsecured home improvement loans tax deductible?

Yes, just the same way you can deduct your secured loans you can also deduct unsecured loans. How much you spend on your loan can’t be deducted entirely, but you can deduct the interest you pay on your loans.

Can I write off a home improvement loan?

You can write off your home improvement loan, but only the interest of the loan, either as home acquisition debt or home equity debt. In order to make this claim, you must itemize your deductions and forgo standard deductions.

Jordan Beaumont

Jordan Beaumont

Financial Guru

Jordan's work focuses on helping people reach their financial goals so they can spend more time with family and friends and less time worrying about their budget. After finishing college with a degree in Accounting and Communication, he realized that these are the most important things in life and that people shouldn’t miss out because of money.