Home Improvement Financing [Best Home Improvement Loans in 2022]

What you need to know about home improvement financing

Home improvement financing helps you pay for your remodeling projects or expensive home repairs. With the required loan funds, you can even pay your remodeling contractor or buy supplies to complete the project.

And, you get to pay the loan off over an agreed-upon loan term, with the best interest rates. That's why, a home improvement loan is a boon if you don't have sufficient cash to pay upfront for any major home improvement expenses.

Making any upgrades to your home is usually a wise investment as it adds to its resale value significantly, apart from enhancing its comfort, style, and looks.

And that's when a home improvement loan comes handy — giving you financial assistance if you're unable to afford big property projects on your own.

And, most renovations are pricey. For example, the average kitchen remodel cost across the United States is more than $23,000. The average bathroom remodel cost is around $21,000. And, a 16 x 20-foot wooden deck could cost you more than $14,000.

When you're looking for home improvement financing, the first step is to look for the best loan options by comparing the interest rates, fees, loan terms, and other factors.

A home equity loan, a home equity line of credit (HELOC), or a personal loan are some of the possibilities. Apart from these common types of home improvement loans, there are other options such as cash-out refinancing, government-backed loans, funding through credit unions and online loan lenders.

The type of loan you choose depends on your financial situation and the scale of your home improvement project. For minor projects such as wall painting, using a credit card might work but for larger projects, you may want to consider the above loan home improvement financing options.

Fortunately today, homeowners looking to cover their home improvement costs have a lot of choices. And, we'll help you identify some of the best financing choices that will save you the most money.

Social Finance, SoFi for short, offers personal loans up to $100,000 to those with a good to excellent credit score. This lender also offers easy, no-fee student loans, student loan refinancing, home loans, and even small business financing. The best part is, there are no late fees and co-borrowers are accepted too.

Minimum FICO credit score requirement: 680
Loan amount range: $5,000 to $100,000
Repayment terms: 24 to 84 months
Better Business Bureau rating: A

The national online consumer lending division of the SunTrust Bank, LightStream offers a variety of loans and personal loans up to $100,000 at very good interest rates. You can use the funds for nearly any reason. If you're looking for home improvement financing up to $50,000, this online lender is a good option.

Minimum FICO credit score requirement: 660
Loan amount range: $5,000 to $100,000
Repayment terms: 24 to 144 months
Better Business Bureau rating: A+

Upgrade is another reliable online lender that offers personal loans and lines of credits across the United States. You can qualify for financing up to $50,000 and complete the entire loan process online.

Minimum FICO credit score requirement: Not disclosed
Loan amount range: $1,000 to $50,000
Repayment terms: 36 to 60 months
Better Business Bureau rating: A+

Prosper is a trustworthy peer-to-peer lending marketplace that offers fixed-rate and fixed-term loans. It lends to borrowers with fair to excellent credit scores.

The best part is that you can choose a repayment period of three or five years without worrying about the prepayment penalties because there are none. That's to say that it does not charge any fees for paying off your loan early. What's more, Prosper offers loan pre-approval with a soft credit check. Plus, joint personal loans are also available.

Minimum FICO credit score requirement: 640
Loan amount range: Smaller loans
Repayment terms: 3 or 5 years
Better Business Bureau rating: A+

No, it's not. If you have a good credit score, getting a home improvement loan is not such a gruelling task. A great credit also means that you could benefit from lower interest rates and better offers. And, you get to choose how long you want to take to pay back the loan.

Here are a few steps that you can follow to start the loan process:

Check your eligibility for the loan you're looking at. Most home improvement lenders require a minimum credit score to approve your loan. The general benchmark is around 620 and above.
Review your credit report to check for any errors. Reach out to your credit bureau if you find any.
Work on improving your credit score by paying down your debt, before applying for a home improvement loan.
Determine the loan amount you need. Factor in some extra money for any errors or sudden expenses in your remodeling budget.
Choose your preferred loan term. A home improvement loan can be upto a period of 30 years depending on the amount and project. However, keep in mind that a long-term loan could make sense only if you're financing a large-scale renovation such as a room addition or a roof replacement. You shouldn't take a 30-year loan for minor home renovations such as flooring or kitchen cabinet replacement.
Get prequalified with loan lenders to compare their loan rates and terms. Make sure the lenders only do a soft credit check, not a hard inquiry. It can pull down your credit rating.
Finalize the best loan option and get the money. With a personal loan, you can get the funds as quickly as the next business day after accepting the loan terms. A cash-out refinance, on the other hand, can take up to 45 days.

The best way to renovate a house without spending much money is to become resourceful and only buy materials that add more value than their cost.

Keeping the renovation costs low is as crucial for a homeowner as it's for a real estate investor who's flipping homes. The last thing a flipper would want is to go over budget and erode their bottom line.

Make changes that will add value to your home
Go for DIY projects instead of hiring labor
Or, trade and barter for labor
Borrow or rent equipment and tools
Shop around for the best bargains and deals
Buy only what you need, not what you want
Opt for second-hand goods

A home improvement loan with bad credit is always more challenging than when you have a flawless score. Most lenders have a minimum credit score requirement — usually of 620 and more. However, government-backed loans such as the 203(k) loans or VA loans have a minimum score requirement of just 500. So, you still stand a chance with a bad credit. Also, there are some bad credit home improvement loans and personal loans available on the market. You just have to do some research and apply for them.