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5 Best Home Improvement Loans of 2022
By Kat Tretina MONEY RESEARCH COLLECTIVE
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
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.
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.
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.
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.
Why we chose it: Credible makes it easy to compare home improvement loans and find the best rates through its simple online platform.
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.
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.
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.
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.
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.
