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Best Home Improvement Loans for 2020
With about half of U.S. homes built before 1980, home improvement is a common practice among homeowners looking to increase the value of their property. As homeowners put more money into projects like bathroom remodels, kitchen counter replacements and even tearing up the carpet to rejuvenate original hardwood floors, home improvement loans have become more popular. Home improvement loans help homeowners invest in their home by expanding for new family members or even getting more money back on their equity.
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The 7 best home improvement loans of 2020
- SoFi: Best Overall
- Avant: Best for Bad Credit
- LightStream: Best for Good Credit
- Wells Fargo: Best for Existing Customers
- Upstart: Best for New Credit
- Marcus by Goldman Sachs: Best for No Fees, Ever
- LendingClub: Best P2P Lender
The best home improvement loans at a glance
| Provider | Minimum Credit Score | Best APR | Terms | Loan Minimum | Loan Maximum |
|---|---|---|---|---|---|
| Sofi | 680 | 5.99% with autopay | 2–7 years | $5,000 | $100,000 |
| Avant | 600 | 9.95% | 24–60 months | $2,000 | $35,000 |
| LightStream | 660 | 4.99% with autopay | 2–12 years | $5,000 | $100,000 |
| Wells Fargo | 600 | 5.74% | 12–84 months (12–36 months for loans under $5,000) | $3,000 | $100,000 |
| Upstart | 620 | 8.13% | 3 or 5 years | $5,000 | $30,000 |
| Marcus by Goldman Sachs | 660 | 6.99% | 3–6 years | $3,500 | $40,000 |
| LendingClub | 600 | 10.68% | 3–5 years | $1,000 | $40,000 |
Rates accurate as of July, 2020.
Best overall – SoFi
SoFi helps borrowers invest in their homes, but only credit score royalty may receive the best rates or even qualify.
If you have average credit, SoFi is a great fit for your home improvement loan with large borrowing amounts and flexible terms. SoFi offers loan amounts up to $100,000, so it’s a great fit for more extensive projects, especially given its reasonable fixed rates. This is an online lender, so there are no physical locations to visit while closing your loan. While SoFi recommends a minimum credit score of 600, you can pre-qualify before you apply. There is no collateral or equity needed, and if you lose your job, SoFi will even pause your payments while you get back on your feet — a very important consideration since the arrival of COVID-19.
Best for bad credit – Avant
You don’t need to have a perfect financial record to find decent home improvement loan rates, just look at Avant for solutions.
Avant makes it possible to buy a reasonable home improvement loan even if you have bad credit. If you have bad credit, Avant offers a reasonable solution to your home improvement loan without adversely impacting your credit situation. Avant allows you to perform a soft credit inquiry without risk to your credit score, and there’s no home equity required. An extra administrative fee can tack on up to an additional 4.75% to your total loan, but you can receive funding as soon as the next day, which can be a lifesaver when you find yourself in a jam during the home improvement process.
Best for good credit – LightStream
LightStream offers competitive home improvement loan rates for customers who want to modernize, update and, well, streamline their homes.
Use a cosigner when applying with LightStream to benefit from low rates on your home improvement loan. LightStream is the online lender from SunTrust (soon to be Truist), so it comes with powerful backing. We love that there are no fees — you won’t suffer from late fees if you run a little late on your payment one month, and there are no origination fees, either. LightStream also offers the ability to add a co-signer, so if you have new or poor credit, you can still get the loan you need to repair your home.
Best for existing customers – Wells Fargo
Wells Fargo’s home improvement loans can help the investment in your home go far.
Enjoy personalized care with an established bank that offers flexible loans. Wells Fargo offers plenty of loan options, including unsecured personal loans that do not require collateral and have no origination fees. This is fantastic for existing Wells Fargo customers since there’s an extra 0.25% loyalty discount. If you are not already a customer, you will need to apply in-person at one of its branches, but it won’t be a challenge since Wells Fargo is all over the U.S.
Best for new credit – Upstart
If having new credit is in the way of making your new house a home, try Upstart’s forgiving credit eligibility on home improvement loans.
Use your employment and education along with your credit score to receive a home improvement loan of up to $35,000. Funding is fast, sometimes as soon as the next day, when you qualify for Upstart’s loans. Its home improvement rates are about average, but they can climb pretty high if you don’t have good credit. You will face percentage-based origination fees, and you have the option to pay your loan off early without penalty. However, $30,000 may not be enough for a full home remodel, but could get you a bathroom renovation and a new kitchen.
Best for no fees, ever – Marcus by Goldman Sachs
We love that there are no fees and a great mobile app. However, to get a loan from Marcus, your credit can’t miss the mark.
Enjoy the benefits of Goldman Sachs lending with no membership required. Marcus by Goldman Sachs offers impressively low APRs for your home improvement loan. Unlike Wells Fargo, you don’t have to be a Goldman Sachs customer to apply, and loans start as low as $3,500. The bank offers solid options if you need a small or medium-sized loan, but you will need a higher credit score to apply — a minimum credit score of 660 is recommended. You even receive access to the convenient mobile app for efficient lending.
Best peer-to-peer lender – LendingClub
As one of the first peer-to-peer lenders in the industry, LendingClub created a pretty decent club of funding and borrowing, but the club fees can be steep.
LendingClub’s network of investors funds your loans from multiple investors, making it easier to get the money you need. LendingClub really makes it easy to get a loan. With loan amounts starting at low as $1,000, you can apply on your own or with a cosigner to qualify. You can even perform a soft credit check, so you know your options before your credit is affected by the application process. Unfortunately, you pay for that flexibility, because LendingClub has the highest APR on our list and includes origination fees.
What is a home improvement loan?
The life of a homeowner isn’t always easy, and it’s important to invest in your home — not only for quality of life, but also for the return on your investment. Home improvement loans can be used to make much-needed repairs not covered by insurance or to remodel outdated portions of your home.
A home improvement loan is much like other kinds of loans. You borrow a set amount according to the lender’s terms and make payments over time to repay both the original amount and the interest that accrues.
There are some key things to look for, such as the minimum credit score that is required, any fees that your lender may charge and how quickly you can expect to receive funding.
Are home improvement loans tax deductible?
You may be able to take advantage of handsome tax benefits from the IRS if you used a home equity loan as a home improvement loan, leveraging the interest you pay on your home equity loan or home equity line of credit, claiming these payments as deductions on your annual tax filing. The IRS allows you to claim tax-deductible home improvement loans up to $375,000.
Not all loans apply here, however. Specifically, personal loans used for home improvement are not tax-deductible.
[Read: 4 Eco-Friendly Home Modifications That Can Lower Your Home Insurance Premium]
Pros and cons of home improvement loans
Pros
- Flexible financing
Home improvement loans can be used for almost anything in improving your home. New cabinets, new countertops, roofing, pool installments, patio renovation, bathroom remodeling and more all fall under home improvement. This makes home improvement loans a great option for making your house a home. - Fast cash
When your home needs emergency repairs, every minute counts. A home improvement loan gets you the cash you need quickly before the damaged property is ruined beyond repair. - Increase property value
Your home improvements can boost the value of your home, so your home improvement loan could act as an investment that could even help you pay off your loan over time.
Cons
- Watch the timing
Poor market timing could end up costing you significantly, so try to avoid taking out a home improvement during a recession or other times of economic trouble. - Shoddy Service
It’s essential that you choose the right partners to help you with your home improvement loan. This includes everyone, like the perfect lender who offers an affordable rate and the professional contractors you choose to perform and guarantee your renovations.
How to find the right home improvement loan?
Before you apply for a home improvement loan, it is important to first know where you stand. Be sure to check your credit score so you don’t waste time applying to banks and online lenders who will be unable to help you. When you have multiple inquiries on your credit report, it could damage your credit score and decrease your chances of a loan from other providers. Your home may also provide equity that you can use toward your home improvement loan application.
When you apply, be sure to specify the purpose of your application; the more information the lender has about your project, the more likely it is that they will approve your application and do so quickly. Furthermore, do your research to ensure that you were asking for the appropriate amount. Asking for more than you actually need can end you in financial trouble or a lender denying your loan amount.
When you choose the right loan for you, your lender will provide you with a detailed list of terms and conditions for your loan. This will include the length of your loan, so you know when and how to pay it back.
What is the best loan for financing home improvements
The best home improvement loan for you is going to depend on a number of factors, most notably how much do you intend to borrow. Your desired loan amount may narrow the field and limit the number of lenders that are available to provide the kind of loan that you need. While some wonders will offer a $100,000 loan, others may limit their borrowing amounts to just $35,000.
You will also need to consider factors like the minimum credit score needed for each lender, the loan terms that determine how long you have to pay your loan back and, of course, the APR, so you know how much interest you will pay on the total loan over time.
Too long, didn’t read?
No matter what kind of home improvement loan you need, there is likely a provider out there for you. Even borrowers with poor or new credit can find a loan that works for both their needs and their income. It’s important to consider not only the APR on your loan but also the loan terms and how much money is available to borrow.
We welcome your feedback on this article and would love to hear about your experience with the home improvement loans we recommend. Contact us at inquiries@thesimpledollar.com with comments or questions.
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Methodology
The SimpleScore is a proprietary scoring metric we use to objectively compare products and services at The Simple Dollar.
For every review, our editorial team:
- Identifies five measurable aspects to compare across each brand
- Determines the rating criteria for each aspect score
- Averages the five aspect scores to produce a single SimpleScore
Here’s a breakdown of the five aspect scores and their rating criteria for our review of the best personal loans of 2020.
Why do some brands have different SimpleScores on different pages?
To ensure the SimpleScore is as helpful and accurate as possible, we developed unique criteria for every category we compare at The Simple Dollar. Since most brands offer a variety of financial solutions, their products and services will score differently depending on what we’re scoring on a given page.
However, it’s also possible for the same product from the same brand to have multiple SimpleScores. For instance, if we compare NetCredit’s personal loans according to our criteria for the best personal loans, it scores a 2.3 out of 5. But when we compare NetCredit according to the criteria for the best bad credit personal loans, it scores considerably higher, since the criteria for the latter review are more lenient (lenders who serve borrowers with bad credit will always offer higher rates, so we needed to adjust our category methodology to account for different industry standards).
Questions about our methodology?
Email Hayley Armstrong at hayley@thesimpledollar.com.
Rates
We looked at the maximum APR for each lender — the lower their maximum rate, the higher their score.
Loan Size
We awarded higher scores to lenders with more generous loan sizes.
Customer Satisfaction
We leveraged the J.D. Power 2019 Personal Loan Satisfaction Study℠ to see how customers rated their experience with each lender. (If a lender wasn’t included in J.D. Power’s study, we skipped this aspect and averaged the four remaining aspect scores.)
Support
We awarded higher scores to lenders with the most channels for customer support.
Fees
We looked at the three most common fees — origination, late payment, and pre-payment — and penalized lenders for each fee charged.
Reviewed by
Courtney Mihocik
EditorCourtney Mihocik is an editor at The Simple Dollar who specializes in insurance, personal finance, and loans. Previously, she wrote and edited for Interest.com, PersonalLoans.org, Ballantyne Magazine, Thread Magazine, The Post, ACRN, The New Political, Columbus Alive and the Institute for International Journalism.
