When choosing a home improvement loan, consider your borrowing needs. Some lenders, like Upgrade, offer smaller minimum loan amounts, while others, like Discover, offer a quick and easy application process. But overall, the best home improvement lender we reviewed was SoFi.
SoFi offers benefits such as fast funding, flexible repayment terms, and no fees. In addition to this, the lender also offers low rates, high loan amounts, and unemployment protection. Unless you have bad credit or need a smaller loan, SoFi will be the best option for your home improvement needs. And you can always compare rates with SoFi’s prequalification option.
Guide to Choosing the Best Home Improvement Loans
Determine your need for a home improvement loan
The first step is to decide if you need a home improvement loan. If you prefer to borrow against the equity in your home, you can consider a home equity loan or a home equity line of credit. An advantage of personal loans from the above lenders? They’re unsecured, so you don’t risk losing your home, and don’t require a closing process, so you can get your money fast.
The next step is to estimate the amount you will need to borrow. Websites like HomeAdvisor can provide you with a range based on typical project costs in your city, but you may want to get a few quotes from contractors to get a more accurate estimate. Keep in mind that some entrepreneurs offer their own financing programs, but you should always compare the rates and terms offered with a traditional personal loan.
Comparison of home improvement lenders
There’s a lot to consider when looking at your home improvement loan options. For example, you’ll want to assess each potential lender based on the following:
- APR: Estimate how much you will pay to borrow money.
- Costs: Determine if the lender charges an origination fee that will be deducted from your loan amount, late fees, or any other fees. You should select the lender with the lowest fees you can qualify for.
- Loan amounts: Choose a lender who can offer you the exact amount you need. If possible, avoid borrowing more than you need.
- Loan conditions : Make sure the lender offers a term that will allow you to comfortably pay your fixed monthly payments.
- Penalties: Most lenders don’t impose prepayment penalties, but you should eliminate any options that will penalize you for paying off your loan early.
- Discounts: Can you get a lower rate for signing up for automatic payments, applying with a co-signer, or anything else?
- Funding speed: If you need money fast, be sure to select a lender with fast financing.
- Ease of application: It’s not the most important factor, but lenders with complicated applications can be off-putting. The best lenders make it simple to apply.
- Customer service: Hope you never need customer service. But if you do, make sure the lender offers customer service hours and channels (online, phone, etc.) that work for you.
- Reputation of the lender: Find out what other borrowers are saying about the lender. While it’s common for lenders to have mixed reviews, an abundance of horror stories is a bad sign.
- Eligibility: You may not qualify for our top pick if you have fair credit. When comparing lenders, go through the prequalification process each time to see if you qualify, especially if you have less than perfect credit.
Apply for a home improvement loan
Once you have selected a lender and prequalified for a loan, gather the necessary information and documents. You will likely need to provide information such as your social security number and proof of income. Decide whether you want to apply online or over the phone with help from customer service, then go through the approval process.
The lender you choose may offer you several loan options. Choose the amount and duration that best suits your needs. From there, create a new budget that includes paying off the loan. This way you can set up automatic payments and be sure that you will always have the funds available to cover your monthly payment.
Keep in mind that some lenders will allow you to choose and change your due date, which can be useful if an emergency arises and you need more time to make your payment. Most lenders let you manage your account online or through a mobile app, so you can make changes without contacting customer service.
Frequently Asked Questions
What is a home improvement loan?
The term “home improvement loan” generally refers to an unsecured personal loan used for home improvement or repair, but it can also refer to any type of loan used for home improvement. the habitat. For instance, home equity loans and home equity lines of credit (HELOC) are secure forms of financing that can be used to fund home improvement projects.
How do home improvement loans work?
Home improvement projects can be expensive, so many families have to borrow money to pay for the work. When you apply for a home improvement loan and are approved, you will receive the money you need in a lump sum minus the origination fee, if there is one.
From there, you repay the loan in fixed monthly installments. These payments will include part of the principal (the amount you borrowed) and interest (the extra amount you owe the lender for allowing you to borrow money). You’ll end up paying more than you borrowed over time, but you’ll get the financing you need now. This can be especially useful if an emergency triggers the home improvement project.
What are the different types of home improvement loans?
There are several ways to finance a home improvement project with a loan:
- Unsecured Personal Loans: These provide a lump sum of money usually repaid in fixed installments and do not require collateral
- Home Equity Loans: These are secured by your home and allow you to borrow a lump sum against the equity you have built up in your home.
- Home Equity Lines of Credit (HELOC): These are revolving lines of credit with a maximum limit that allows you to borrow only what you need and pay it back later. They are useful for ongoing projects.
- Refinancing by collection: This involves replacing your current mortgage with a mortgage for a higher amount and keeping the difference in cash.
- FHA 204(k) loan: This is a federal loan program that you can use to buy and renovate a home with just one loan.
- Credit card: These are payment cards that allow you to make purchases from a line of credit.
- Contractor financing: Some entrepreneurs offer financing programs through partner lenders. The lender usually pays the contractor directly for the work.
What are the pros and cons of getting a home improvement loan?
- Get your loan proceeds faster than with some forms of secured financing
- Repay in fixed, predictable monthly installments
- No collateral needed, like your home or vehicle
- Home improvement loan rates can be higher than secured forms of finance
- Risk of default if your financial situation changes
- Lump sum payment (draw on a line may be preferable if you don’t know how much you will need)
How We Choose The Best Home Improvement Loans
Our team evaluated 38 lenders and collected 1,520 data points before narrowing down our top picks. We weighted more than 20 criteria and gave a higher weight to those having a more significant impact on potential borrowers.
Top picks were selected based on factors such as membership requirements (15% weighted), average fixed APR (15% weighted), and average origination fee (10% weighted).
We also considered flexible repayment terms, useful features such as pre-qualification, and whether co-signer or joint applications are allowed to ensure borrowers have the best possible experience. For more information on our selection criteria and process, our complete methodology is available.