Home Improvement Loans: Compare Options for Financing Your Project

If you’re looking to fund home repairs, renovations, or upgrades, you have several options for financing. Personal loans offer quick, but unsecured funding. On the other hand, home equity loans, home equity lines of credit (HELOCs), and cash-out mortgage refinancing use your home’s equity for larger projects.

No single financing option works best for everyone. The right loan depends on your financial situation, needs, and project size. Good credit helps you qualify for more options at the best rates and terms.

Below, you’ll learn how home improvement loans work, what they cost, how to qualify, and how to choose the right one for your next project.

What Are Home Improvement Loans?

Home improvement loans are financing options that help you pay for home repairs, renovations, or upgrades. Although you have multiple ways to borrow for home projects, the term “home improvement loan” typically refers to a personal loan.

A personal loan for home improvement projects gives you a lump sum of money up front. You repay it with fixed monthly payments over a set term — usually one to seven years — at a fixed interest rate.^[1]

Loan amounts typically range from $1,000 to $50,000, though some lenders offer amounts up to $100,000. Interest rates also vary by lender and credit profile, but many lenders advertise an annual percentage rate (APR) ranging from about 6% to 36%.

Unlike home equity loans or lines of credit (HELOCs), unsecured personal loans don’t use your home as collateral, which means you won’t lose your house if you can’t make timely payments. Unsecured personal loans also fund faster — often within a few days — and usually don’t require an appraisal or closing process.

That said, interest on home equity loans and HELOCs may be tax-deductible if you use funds to buy, build, or substantially improve the home securing the loan.^[2]

Best Home Improvement Financing Options

Homeowners have several loan options to finance home renovations. Each option comes with its pros and cons. The right choice depends on your credit score, your home’s value, how much equity you have, how much you need to borrow, and how quickly you need the funds.

Here’s a side-by-side comparison to help you choose the right type of loan for your home remodel, based on information from major lenders and industry data.

Financing Type	Typical Rates	Typical Loan Amounts	Funding Time	May Be Best for
Personal loan	6%–35.49%	$1,000–$100,000	Up to 3 business days	Homeowners who need fast funding for smaller projects
Home equity loan	7%–9.24%	Up to $2.5 million or 80%–90% of available home equity	2–8 weeks	Homeowners making large, one-time purchases who want predictable, fixed payments
Home equity line of credit (HELOC)	Variable;5%–18%	Up to 85%–90% of available home equity	6–10 weeks	Homeowners who want flexible access to funds for ongoing or phased projects and are comfortable with variable interest rates
Cash-out mortgage refinance	5%–6.50%	Up to 80%–90% of home equity	15–90 days	Homeowners with major renovation projects and high-interest-rate mortgages who plan to stay in their home long term

Sources: National Credit Union Administration (NCUA) Credit Union and Bank Rates, Federal Reserve Consumer Credit, Wells Fargo, and U.S. Bank. Rates shown are current as of March 2026 and may vary by lender, borrower qualifications, and market conditions.

Personal loans for home improvement

Personal loans can fund home improvement projects like bathroom updates or roof repairs. They typically come with fixed interest rates and loan terms, fund fast, and don’t require collateral. You can also use a personal loan for other things, such as debt consolidation, funding a wedding, or covering vehicle repairs.

That said, personal loans often come with higher interest rates and lower borrowing limits than other home improvement loan options.

Home equity home improvement loans

Home equity loans (HELOANs) are second mortgages that use your home as collateral, allowing you to borrow against the equity you’ve built up. They’re usually for large, one-time renovations like kitchen remodels or additions.

Home equity loans typically offer lower interest rates, larger loan amounts, and longer repayment terms than personal loans because your home secures the loan. But the application process usually takes weeks, and if you default on the loan, your lender can foreclose to recover the debt.

Home Equity Lines of Credit (HELOCs)

A HELOC is a revolving credit line that uses your home’s equity as collateral. Borrowers often use HELOCs for phased or ongoing projects. You borrow as needed during the draw period, which is usually between five and 10 years, then repay during the repayment period — typically up to 15 years. You repay the amount you borrow, plus interest.^[3]

HELOCs usually have variable interest rates and may require up-front fees, such as loan application or origination fees.

Cash-out refinancing loans for home improvement

A cash-out refinance replaces your existing mortgage with a larger one and gives you the difference in cash. Loan amounts depend on your home’s equity. Refinancing is common for major renovations or paying off debt. You’ll usually get the lowest rates when refinancing, but it depends on factors like your credit history and debt-to-income ratio.

Refinancing often requires closing costs, which can total about 3% to 6% of your outstanding loan balance.^[4]

How Much Home Improvement Loans Cost

The cost of a home improvement loan depends on several factors, including the loan type, lender, your credit profile, and the size of your renovation project.

The loan terms also play a big role in your monthly payments and overall cost. For example, a personal loan may have a higher interest rate than a HELOAN. But its shorter repayment schedule means you could spend less over the life of the loan.

A personal loan typically doesn’t have a prepayment penalty, so paying it off early can save you even more in interest.

The table below shows typical APR ranges for the most common home improvement financing options.

Financing Type	Typical APR Range
Personal loan	6%–35%
Home equity loan	7%–9%
HELOC	5%–18%
Cash-out refinancing	5%–7%

How to Qualify for a Home Improvement Loan

Eligibility requirements for a home improvement loan depend on the type of loan and lender. Common factors lenders consider include:

• Credit score: Many lenders require a minimum credit score of 660 to qualify. Borrowers with excellent credit get the best rates and loan terms.

• Income verification: Lenders want proof you can repay the loan, such as pay stubs, tax returns, or bank statements.

• Debt-to-income (DTI) ratio: The percentage of your income that goes toward your debt payments. The lower your ratio, the better your chances of qualifying. Many lenders view your DTI ratio as a key indicator of your ability to repay a loan, and a DTI ratio of 45% or less improves your approval chances.^[5]

• Home equity: The difference between your home’s value and what you still owe on your mortgage.

Some lenders also consider alternative factors, like education or employment history. Many offer pre-qualification, which estimates your loan approval odds and potential rate. You’ll usually answer a few basic questions about your income, credit, and borrowing needs. The lender then performs a soft credit check, which won’t affect your credit score.

To improve your chances, consider adding a co-signer, choosing a secured loan, lowering your DTI, or improving your credit score before applying. These steps can also help you qualify for better rates and loan terms.

Where to Get Home Improvement Loans

You can get a home improvement loan from banks, online lenders, or credit unions. Each option offers different rates, funding speeds, and approval requirements. The best choice depends on how quickly you need the money, your credit standing, and whether you already have a relationship with a financial institution.

• Banks: Traditional banks offer several home improvement loan options. Banks often offer competitive rates to borrowers with good to excellent credit but tend to have stricter requirements. The approval also usually takes longer.

• Online lenders: Many online lenders specialize in fast personal loans and offer a prequalification process. Some can fund loans within a few business days. The application process is usually quick and convenient, but rates can be higher.

• Credit unions: As member-owned institutions, credit unions offer lower rates and more flexible terms. But you must qualify for membership to access credit union loans.

Lender Type	Funding Speed	Typical Rates	Relationship Required?
Banks	2–10 weeks; Personal loans can fund in days	Competitive for good and excellent credit	Often preferred
Online lenders	1–3 business days	Usually higher than banks	No
Credit unions	A few days to weeks	Often lower rates	Yes

Pros and Cons of Home Improvement Loans

Every home improvement financing option comes with trade-offs. Weighing the benefits and risks before you borrow can ensure you choose a loan that fits your budget, credit profile, and long-term plans.

Alternatives to Home Improvement Loans

If traditional financing isn’t the right fit, the following alternatives may cost less or be easier to qualify for, depending on your situation and project size.

• Credit cards: Unless you can get a low- or no-interest introductory offer, credit cards typically have high APRs and should only be used for small repairs of less than $5,000. Credit approval requirements vary by lender, but most expect you to have good to excellent credit.^[6] 

• Contractor financing: Contractors often partner with lenders to offer project-specific financing, eliminating the need to shop around. But these loans may place a lien on your home, similar to equity-secured loans, meaning the lender can foreclose if you default.

• Government programs: FHA Title 1 home improvement loans are unsecured, fund quickly, and are easier to qualify for, but are capped at $25,000. Rehabilitation mortgages are available for fixer-uppers and combine the purchase price and renovation costs into a single loan. Energy improvement mortgages (EIM) let you borrow up to 115% of your home’s value for energy efficiency upgrades.

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