Best home improvement loans

Written by: Jennifer Brozic
• Updated •8 min read
This date may not reflect recent changes in individual terms.
Two dads and their daughter in the kitchen baking.Image: Two dads and their daughter in the kitchen baking.
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When you’re ready to tackle some of the home repairs or remodel projects on your to-do list, a home improvement loan can provide the money you need to take those projects from dream to reality.

We’ve rounded up our picks for the best home improvement loans based on factors like loan amounts and fees — and the ability to apply for prequalification. Prequalifying lets you see your estimated interest rates and costs before you apply formally and subject yourself to a hard credit inquiry, which can hurt your credit scores a bit.

Best for competitive rates: LightStream

Why LightStream stands out: Unlike many personal loan lenders that cap loan amounts at $40,000 or less, online lender LightStream offers loans up to $100,000. That makes it possible for qualified applicants to apply for the funds they need for larger-scale home improvements.

Pros

  • Competitive rates and a rate discount if you enroll in autopay
  • “Rate-beat” program promises to beat competitors’ rates by a small percentage if you meet certain criteria
  • Multiple repayment options from 24 months to 20 years, depending on the loan type

Cons

  • No prequalification option
  • Strong credit required to be approved, and excellent credit required for the best rates

Read reviews of LightStream personal loans to learn more.

Best for applying with a co-applicant: SoFi

Why SoFi stands out: SoFi lets people apply for a personal loan with a co-applicant. If your credit needs some work, applying with a co-applicant who has good credit may improve your chances of qualifying for a loan or receiving a lower interest rate.

Pros

  • Prequalification available
  • Large loan amounts available ($5,000 to $100,000)
  • Member perks like access to financial planners, referral bonuses and more

Cons

  • Origination fees of 0% to 7%

Read reviews of SoFi personal loans to learn more.

Best for smaller home projects: Discover

Discover offers personal loans up to $40,000 so they are best for smaller home projects. There are no fees with Discover personal loans and the loan application process can be completed entirely online. Plus, you may be able to get funding as soon as the next business day.

Pros

  • No origination fees
  • Prequalification available
  • May receive funds quickly

Cons

  • No co-applicants
  • Loan amounts only up to $40,000

Read reviews of Discover personal loans.

Best for a fixed rate HELOC: Figure HELOC

Figure HELOCs are unique in a few ways. Many HELOCs have variable APR rates that fluctuate based on the prime rate. With Figure, you can get a fixed rate on your HELOC, but you’ll need to withdraw the full amount of your credit line when you first take out your HELOC in exchange. Down the line, you can take out more money during your draw period as you make payments to your credit line. But you’ll have new interest rates on any new amount borrowed.

Pros

  • Online-first application process
  • Able to prequalify and lock your rate
  • Fixed rate HELOC

Cons

  • Potential origination fee
  • Maximum loan amount varies by credit
  • Not available in all states

Read our full review of Figure HELOCs.

Best for rate discounts: Bank of America HELOC

Bank of America HELOCs offer multiple ways to earn rate discounts, even if you aren’t a rewards member — though Bank of America customers have the most potential to save.

Pros

  • No application fee, closing costs or annual fee
  • Large loan amounts available
  • Can convert all or some of HELOC to a fixed rate

Cons

  • Must be in-person to complete closing

Read out full review of Bank of America HELOCs.

What is a home improvement loan?

A home improvement loan is a type of financing that allows homeowners to pay for repairs or renovations to their house. There are a few types of loans that can be used for home improvements. Personal loans, home equity lines of credit (HELOCs), and home equity loans can be used to finance home improvements. 

Both HELOCs and home equity loans allow you to borrow against the equity you have in your home. A HELOC works similarly to a credit card where you can borrow what you need — up to a certain limit — and then pay back what you’ve borrowed with interest. 

A home equity loan is more similar to a personal loan where you receive a lump sum of money at the beginning of the loan term and you make monthly payments to pay the loan off. But home equity loans are secured through the equity in your house while personal loans are often unsecured loans. 

HELOCS and home equity loans may offer better interest rates than personal loans since they are secured with your house. But it’s always a good idea to shop around when looking for loans so you get the best rate and terms for your financial situation.  

When is a home improvement loan a good idea?

If you want to remodel your kitchen or need to repair your roof and don’t have the cash on hand to pay for it, a home improvement loan may be a good idea for you. 

Personal loans, home equity loans or HELOCs all may be options. But keep in mind that home equity loans or HELOCs typically require you to have enough equity built up in your home: typically at least 20%. 

And before moving forward with a home improvement loan, make sure the loan will fit into your budget comfortably and you’ll be able to make payments every month. 

Prequalifying with potential lenders can help you get an idea of the rates, terms and monthly payments you may be approved for. Keep in mind that if you get a HELOC or home equity loan, your house will be used as collateral. If you default on your loan, you risk the bank foreclosing on your home.

Home improvement loans and alternatives to consider

There are several types of loans that can be used for home improvement projects — home equity loans, home equity lines of credit, or HELOCs, and personal loans. If those options aren’t appealing, you could also consider refinancing your home or tapping into a low-interest credit card with promotional terms.

Here’s what you should know about some of your borrowing options.

Home equity loans and home equity lines of credit

Home equity loans and HELOCs both allow you to borrow money based on any equity you have in your home. The amount can also vary based on your income, credit and other factors.

If you get a home equity loan or HELOC, your house becomes collateral. You may get a lower rate with this type of secured financing than you would with an unsecured personal loan. But you also may pay more fees because you may have to pay for closing costs just like you did when you got the original mortgage.

And if you default on your loan, the lender may foreclose on your house to recoup the money you owe. Before getting a home equity loan or HELOC, make sure you can repay the loan on time since you risk losing your home with this type of borrowing.

Personal loans

Many lenders offer personal loans that can be used to complete home improvement projects. A personal loan may be a good option if you don’t have enough equity in your home to qualify for a home equity loan or HELOC — or if you don’t want to use your home as collateral.

It’s a good idea to shop around, compare your financing options and make sure you can get a reasonable rate before you decide to use a personal loan for home improvements.

Cash-out refi

A cash-out refi may be a good option for you if means you can get a lower interest rate for your mortgage. With a cash-out refi, you take out a new mortgage at a higher balance than your current mortgage. This allows you to pay off your original mortgage and pocket the difference in cash. Keep in mind that you’ll have to pay closing costs and you won’t be guaranteed the same rates and terms as your original loan. 

Low-interest credit card

If your home improvement project doesn’t have a high price tag but it’s still out of your budget, a low-interest credit card could be an option for you. Some credit cards come with a promotional purchase APR. Generally, an intro purchase APR credit card has an APR of 0% for a set number of months. This means that you can pay off a large purchase over the length of the intro purchase APR offer. But you’ll want to make sure you’ll be able to pay off the balance before the end of the promotional offer or else you’ll start to pay interest on the remaining balance.

Our methodology: How we pick the best personal loans

Credit Karma’s editors evaluate the best personal loans by reviewing key features of dozens of popular lenders. Those features fall into three important categories:

  • Affordability: We start by checking if a lender’s rates are competitive: are they higher than average or are they lower than many competitors? From there, we analyze if fees — particularly an origination fee — may make your loan more unaffordable. Last, we’ll check if the lender offers rate discounts for items such as automatic payments that may reduce your rate.
  • Customer-friendly features: Taking out a personal loan is a big financial commitment, so we prioritize lenders that make things easier for you. For instance, do they offer a wide range of loan amounts for people with different borrowing needs? Do they offer at least several loan terms to give you more flexibility with your monthly payment? And, crucially, can they fund your loan quickly? A lender will also get bonus points for offering direct payments for debt consolidation or other customer-friendly features.
  • Transparency: We believe personal loan terms should be easy to find and decipher. Prequalification, which lets you check what rate you may qualify for without a hard credit inquiry, is particularly important. We also check to see if a lender has been recently penalized by regulators.

Estimate personal loan costs

To better understand the total cost of any personal loans you’re considering, use an online calculator like Credit Karma’s simple loan calculator. A loan calculator can help you estimate your monthly payment and how much you’d pay in interest versus principal over the length of the loan.

FAQs about home improvement loans

What type of loan is best for a home addition?

The best loan for a home addition will be different for everyone. If you have a set amount of money you need for the home addition, a personal loan may work best for you. But if you’re not sure how much you need or want to have the flexibility to borrow as time goes on, a HELOC may work better for you.

What credit score is needed for a home improvement loan?

To get the best rates and terms for a home improvement loan, you’ll usually need excellent credit. But there are lenders that may give loans to people with less than perfect credit. Just keep in mind that you’ll likely pay more to borrow.

What is the average length of a home improvement loan?

The average length of a home improvement loan depends on the type of loan you get and how much you’re borrowing. Personal loan terms can range from a few months to more than 10 years. HELOCs often have a 10-year draw period and then a repayment period of 20 years (and occasionally longer).

*Approval Odds are not a guarantee of approval. Credit Karma determines Approval Odds by comparing your credit profile to other Credit Karma members who were approved for the personal loan, or whether you meet certain criteria determined by the lender. Of course, there’s no such thing as a sure thing, but knowing your Approval Odds may help you narrow down your choices. For example, you may not be approved because you don’t meet the lender’s “ability to pay standard” after they verify your income and employment; or, you already have the maximum number of accounts with that specific lender.

About the author: Jennifer Brozic is a freelance financial services writer with a bachelor’s degree in journalism from the University of Maryland and a master’s degree in communication management from Towson University. She’s committed… Read more.