23/06/2024

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Best Home Improvement Loans Of January 2023

Best Home Improvement Loans Of January 2023

Whether you’ve recently bought a house and want to make some adjustments or have been a homeowner for quite some time and think you’re long overdue for some renovations, you’ll want to make sure you have the financial means to take on such project.

Home improvement costs can vary depending on what part of the home you’re fixing, but according to Rocket Mortgage, Americans spend an average of $15,000 on a single home improvement project.

If you don’t have the savings to float your entire improvement project, you might consider applying for a personal loan since it can be used for a variety of expenses and typically carry lower interest rates compared to credit cards. Personal loans must be paid back in regular increments over a set period of time. The longer your loan term, the lower your monthly payments will be but the more you’ll pay in interest charges over that duration.

Select rounded up six of the best personal loan lenders to consider if you need to finance a home improvement project. When compiling our list of the best personal loans, Select evaluated dozens of lenders. We looked at key factors like interest rates, fees, loan amounts and term lengths offered, plus other features including how your funds are distributed, autopay discounts, customer service and how fast you can get your funds. (Read more about our methodology below.)

The best home improvement loans

Best overall

LightStream Personal Loans

  • Annual Percentage Rate (APR)

    5.99% to 23.99%* when you sign up for autopay

  • Loan purpose

    Debt consolidation, home improvement, auto financing, medical expenses, wedding and others

  • Loan amounts

  • Terms

  • Credit needed

  • Origination fee

  • Early payoff penalty

  • Late fee

Pros

  • Same-day funding available through ACH or wire transfer
  • Loan amounts up to $100,000
  • No origination fees, no early payoff fees, no late fees
  • LightStream plants a tree for every loan

Cons

  • Requires several years of credit history
  • No option to pay your creditors directly
  • Not available for student loans or business loans
  • No option for pre-approval on website (but pre-qualification is available on some third-party lending platforms)

Who’s this for? LightStream stands out for offering loans with some of the lowest interest rates and providing loans for nearly every purpose except for higher education and small business. In other words, home improvements are fair game for the use of these funds.

It offers the longest-term option among the lenders on this list, which typically means lower monthly payments, and less pressure when repaying debt. On the flip side, a longer term also means you’ll accrue more interest charges over the long run.

LightStream does not charge any origination fees, administration fees or early payoff fees. All these points make this lender an appealing option for those who want to score an interest rate that’s as low as possible and achieve a monthly payment that’s as low as possible.

Best for borrowing smaller amounts

PenFed Personal Loans

  • Annual Percentage Rate (APR)

  • Loan purpose

    Debt consolidation, home improvement, medical expenses, auto financing and more

  • Loan amounts

  • Terms

  • Credit needed

  • Origination fee

  • Early payoff penalty

  • Late fee

Pros

  • Credit union membership available to anyone
  • Loans as low as $600
  • Can pick up a physical at a branch
  • May apply with a co-borrower

Cons

  • Funds come as a physical check
  • Must be a member to get funds (no membership needed to apply)
  • Must pay for expedited shipping to get your funds next day
  • Maximum loan amount of $50,000
  • Late fee of $29

Who’s this for? PenFed offers loans of as little as $600, making it ideal for those who may not necessarily need a massive home improvement undertaking but just need a little extra cash for a smaller fix.

Note that this lender is a credit union. While you don’t need to be a member to apply, you will need to sign up for a PenFed membership and keep $5 in a qualifying savings account to receive your funds.

Also, PenFed provides its funds in the form of a paper check. If you live near a PenFed location, you can pick up your check at any time directly from the bank. Otherwise, you can receive your funds as early as the next day if you pay for expedited shipping.

Best for lower credit scores

Upstart Personal Loans

  • Annual Percentage Rate (APR)

  • Loan purpose

    Debt consolidation, credit card refinancing, home improvement, wedding, moving or medical

  • Loan amounts

  • Terms

  • Credit needed

    Credit score of 300 on at least one credit report (but will accept applicants whose credit history is so insufficient they don’t have a credit score)

  • Origination fee

    0% to 10% of the target amount

  • Early payoff penalty

  • Late fee

    The greater of 5% of last amount due or $15, whichever is greater

Pros

  • Open to borrowers with fair credit (minimum 300 score)
  • Will accept applicants who have insufficient credit history and don’t have a credit score
  • No early payoff fees
  • 99% of personal loan funds are sent the next business day after completing required paperwork before 5 p.m. Monday through Friday

Cons

  • High late fees
  • Origination fee of 0% to 10% of the target amount (automatically withheld from the loan before it’s delivered to you)
  • $10 fee to request paper copies of loan agreement (no fee for eSigned virtual copies)
  • Must have a Social Security number

Who’s this for? If you need to make home improvements but worry that a low credit score would disqualify you from many loans, the good news is that Upstart offers you an option for funding. This lender is ideal for individuals with a low credit score or even no credit history. It considers factors like education, employment, credit history and work experience.

Term lengths are a bit limited, though, compared to other more flexible options; you can choose either a three-year or five-year loan. Borrowers can apply for as little as $1,000 and as much as $50,000.

There are a few fees to be aware of with this loan. Upstart charges an origination fee of up to 10% of the loan amount, as well as late fees, but no early payoff fee.

Best for flexible repayment terms

Marcus by Goldman Sachs Personal Loans

  • Annual Percentage Rate (APR)

    6.99% to 24.99% APR when you sign up for autopay

  • Loan purpose

    Debt consolidation, home improvement, wedding, moving and relocation or vacation

  • Loan amounts

  • Terms

  • Credit needed

  • Origination fee

  • Early payoff penalty

  • Late fee

Pros

  • No origination fees, no early payoff fees, no late fees
  • Will send direct payment to up to 10 creditors (for debt consolidation)
  • Monthly VantageScore updates
  • Earn a one-month payment vacation (interest-free) after making 12 on-time consecutive payments
  • Ability to choose your due date when you accept the loan (and again up to two more times after that)

Cons

  • Does not accept joint applications and/or co-signers
  • Not the fastest funding (can take a week or 10 business days)
  • Slightly tougher approval requirements (especially for larger loans/lower interest)

Who’s this for? A Marcus by Goldman Sachs Personal Loan is a good choice if you’re looking for a no-fee personal loan that gives you some flexibility when it comes to making payments. Borrowers can earn a one-month payment vacation (interest-free) after making 12 on-time consecutive payments. This can be a welcomed reprieve for some borrowers.

This lender also gives you the ability to choose your payment due date when you accept the loan (and again up to two more times after that). This way, you can select a due date that works best with your payment schedule and other expenses.

The maximum funding amount is slightly lower than the maximum from some other lenders: Borrowers can apply for up to $40,000. This may not be a dealbreaker for those who have more modest home improvement undertakings, but if you have a renovation project that’s going to cost significantly more, you might want to consider other lenders.

Best for long repayment terms

SoFi Personal Loans

  • Annual Percentage Rate (APR)

    7.99% to 23.43% when you sign up for autopay

  • Loan purpose

    Debt consolidation/refinancing, home improvement, relocation assistance or medical expenses

  • Loan amounts

  • Terms

  • Credit needed

  • Origination fee

  • Early payoff penalty

  • Late fee

Pros

  • No origination fees, no early payoff fees, no late fees
  • Unemployment protection if you lose your job
  • DACA recipients can apply with a creditworthy co-borrower who is a U.S. citizen/permanent resident by calling 877-936-2269
  • Can have more than one SoFi loan at a time (state-permitting) 
  • May accept offer of employment (to start within the next 90 days) as proof of income
  • Co-applicants may apply

Cons

  • Applicants who are U.S. visa holders must have more than two years remaining on visa to be eligible
  • No co-signers allowed (co-applicants only)

Who’s this for? SoFi offers personal loan amounts up to $100,000, making it ideal for those who have more costly, higher-lift home improvement projects to take on. But this lender also offers repayment terms that are longer compared to those of most other lenders: Borrowers have 24 to 84 months to pay back the loan.

Most other personal loans come with a fixed interest rate but SoFi gives borrowers the option to choose between a fixed and variable APR. Variable rates can go up and down over the lifetime of your loan, which means you could potentially save if the APR goes down (but it’s important to remember that the APR can also go up). However, fixed rates guarantee you’ll have the same monthly payment for the duration of the loan’s term, which makes it easier to budget for repayment.

SoFi also provides a 0.25% discount on your APR if you set up automatic electronic monthly payments.

Best for fast funding

Discover Personal Loans

  • Annual Percentage Rate (APR)

  • Loan purpose

    Debt consolidation, home improvement, wedding or vacation

  • Loan amounts

  • Terms

    36, 48, 60, 72 and 84 months

  • Credit needed

  • Origination fee

  • Early payoff penalty

  • Late fee

Pros

  • No origination fees, no early payoff fees
  • Same-day decision (in most cases)
  • Option to pay creditors directly
  • 7 different payment options from mailing a check to pay by phone or app

Cons

  • Late fee of $39
  • No autopay discount
  • No cosigners or joint applications

Who’s this for? If you need funding in a pinch for a home renovation that’s more of an emergency than it is for vanity, Discover Personal Loans is a solid contender since borrowers can receive their funds as early as the next business day. Of course, in order to get your funds in a timely manner, you must submit an application that is complete and doesn’t contain errors (you’ll also want to make sure the loan is funded on a weekday).

While there are no origination fees, Discover does charge a late fee of $39 if you fail to repay your loan on time each month.

FAQs

How do home improvement personal loans work?

A home improvement personal loan is simply a personal loan that a borrower uses for some type of home renovation project or emergency fix. Personal loans in general are a form of installment credit that can be a more affordable way to finance the big expenses in your life. In addition to home improvements, you can use a personal loan for wedding expenses, debt consolidation, funeral expenses, travel and more.

Because personal loans are a form of installment credit, borrowers repay the balance in fixed, equal amounts over a set period of time. This period of time is known as the loan’s term. Most loan terms range anywhere from six months to seven years. The longer the term, the lower your monthly payments will be, but this also usually means you’ll pay more in interest charges over the duration of your loan. It’s usually best to choose the shortest term that you can afford.

Once you’re approved for your home improvement personal loan, the cash is usually delivered directly to your checking account. When paying back the loan, be aware of any late fees or early payoff penalties. Your monthly payment will include interest. When your personal loan is paid off, the credit line is closed and you no longer have access to it.

How big of a home improvement loan can I get?

Lenders offer the ability to choose from a wide range of loan amounts, starting from $600 and going up to $100,000. However, before you apply, you should consider how much of a loan you can reasonably afford. Avoid taking on a loan that you cannot afford to pay back since you’ll also be responsible for interest charges and any additional fees should you make a late payment or miss a payment.

How is my home improvement loan rate decided?

What are some common personal loan definitions I should know?

Here are some common personal loan terms you need to know before applying.

  • Co-applicants or joint applications: A co-applicant is a broad term for another person who helps you qualify by attaching their name (and financial details) to your application. A co-applicant can be a co-signer or a co-borrower. Having a co-applicant can be helpful when your credit score isn’t so great, or if you’re a young borrower who doesn’t have much credit history. If your co-applicant has a good credit score, you might be offered better terms, including qualifying for a lower APR and/or a bigger loan. At the same time, both applicants’ credit scores will be affected if you don’t pay back your loan, so be sure that your co-applicant is someone you feel comfortable sharing financial responsibility with. 
  • Co-signers: A co-signer agrees to help you qualify for the loan, but they are only responsible for making payments if you are unable to. The co-signer does not receive the loan, nor do they necessarily make decisions about how it is used. However, the co-signers credit will be negatively affected if the main borrower misses payments or defaults.
  • Co-borrower: Unlike a co-signer, a co-borrower is responsible for paying back the loan and deciding how it is used. Co-borrowers are usually involved in decisions about how the loan is used. Some lenders will only consider two co-borrowers who share a home or business address, as this is a firm indicator that they are sharing the responsibility of money in mutually beneficial ways. Both co-borrowers’ credit scores are on the hook if either one stops making payments or defaults.
  • Direct payments: Some lenders offer direct payments when you select debt consolidation as the reason for taking out a personal loan. With direct payments, the lender pays your creditors directly, and then deposits any leftover funds into your checking or savings account. Until you see your account balance is fully paid off, it’s best to keep making payments so that you don’t get hit with additional late fees and interest charges.
  • Early payoff penalty: Before you accept a loan, look to see if the lender charges an early payoff or prepayment penalty. Because lenders expect to get paid interest for the full term of your loan, they could charge you a fee if you make extra payments to pay your debt down quicker. The fees could equal either the remaining interest you would have owed, a percentage of your payoff balance or a flat rate.
  • Origination fee: An origination fee is a one-time upfront charge that your lender subtracts from your loan to pay for administration and processing costs. It is usually between 1% and 5%, but sometimes it is charged as a flat-rate fee. For example, if you took out a loan for $20,000 and there was a 5% origination fee, you would only receive $19,000 when you got your funds. Your lender would get $1,000 of the loan off the top, and you’d still have to pay back the full $20,000 plus interest. It’s best to avoid origination fees if possible. Having a good to excellent credit score helps you qualify for loans that don’t have origination or administration fees. 
  • Unsecured versus secured loans: Most personal loans are unsecured, meaning they are not tied to collateral. However, if your credit score is less-than-stellar and you’re finding it hard to qualify for the best loans, you can sometimes use a car, house or other assets to act as collateral in case you default on your payments. When you put an asset up as collateral, you are giving your lender permission to repossess it if you don’t pay back your debts on time and in full.

Bottom line

Our methodology

To determine which personal loans are the best for home improvements, Select analyzed dozens of U.S. personal loans offered by both online and brick-and-mortar banks, including large credit unions, that come with no origination or signup fees, fixed-rate APRs and flexible loan amounts and terms to suit an array of financing needs.

When narrowing down and ranking the best personal loans, we focused on the following features:

  • No origination or signup fee: None of the lenders on our best-of list charge borrowers an upfront fee for processing your loan.
  • Fixed-rate APR: Variable rates can go up and down over the lifetime of your loan. With a fixed rate APR, you lock in an interest rate for the duration of the loan’s term, which means your monthly payment won’t vary, making your budget easier to plan.
  • Flexible minimum and maximum loan amounts/terms: Each lender provides a variety of financing options that you can customize based on your monthly budget and how long you need to pay back your loan.
  • No early payoff penalties: The lenders on our list do not charge borrowers for paying off loans early.
  • Streamlined application process: We considered whether lenders offered same-day approval decisions and a fast online application process. 
  • Customer support: Every loan on our list provides customer service available via telephone, email or secure online messaging. We also opted for lenders with an online resource hub or advice center to help you educate yourself about the personal loan process and your finances.
  • Fund disbursement: The loans on our list deliver funds promptly through either electronic wire transfer to your checking account or in the form of a paper check. Some lenders (which we noted) offer the ability to pay your creditors directly.
  • Autopay discounts: We noted the lenders that reward you for enrolling in autopay by lowering your APR by 0.25% to 0.5%.
  • Creditor payment limits and loan sizes: The above lenders provide loans in an array of sizes, from $500 to $100,000. Each lender advertises its respective payment limits and loan sizes, and completing a preapproval process can give you an idea of what your interest rate and monthly payment would be for such an amount.

After reviewing the above features, we sorted our recommendations by best for overall financing needs, debt consolidation and refinancing, small loans and next-day funding.

Note that the rates and fee structures advertised for personal loans are subject to fluctuate in accordance with the Fed rate. However, once you accept your loan agreement, a fixed-rate APR will guarantee interest rate and monthly payment will remain consistent throughout the entire term of the loan. Your APR, monthly payment and loan amount depend on your credit history and creditworthiness. To take out a loan, lenders will conduct a hard credit inquiry and request a full application, which could require proof of income, identity verification, proof of address and more. 

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.