What is the best type of loan for home improvements? This question is about Best Home Improvement Loans

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What is the best type of loan for home improvements?

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This question is about Best Home Improvement Loans

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Adam McCann, Financial Writer

@adam_mcan • 08/26/21

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The best type of loan for home improvements is either a personal loan or a home equity loan, depending on things like the amount of funding you need and whether you’re willing to risk your home as collateral. Both of these types of loans allow you to use the money for nearly any expense, including home improvements.

Best Types of Loans for Home Improvements

Type of Loan	Personal Loan	Home Equity Loan
Amount of funding	$1,000 - $100,000	Depends on your equity (could be more than $100k)
Collateral required?	No	Yes, your house
Repayment timeline	1 - 7 years	5 - 30 years
Typical APRs	4% - 36%	4% - 12%
Credit score requirement	585+ (660+ for no origination fee)	680+
Funding timeline	Usually within 7 business days	2 - 6 weeks

The most important distinction between using personal loans and home equity loans for home improvement is the presence or absence of collateral. Personal loans are unsecured loans that allow you to borrow based on your credit, income and other factors. Home equity loans let you borrow based on the difference between your home’s value and the remaining mortgage balance, using your house as collateral if you default. Home equity loans will still consider your credit and income, too.

If you want a lower APR and a longer payoff period, and you don’t mind using your house as collateral, you should use a home equity loan for home improvements. If you prefer having an unsecured loan with less stringent credit score requirements and faster funding, a personal loan is the better choice.

This answer was first published on 08/27/19 and it was last updated on 08/26/21. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.

What is the difference between a home improvement loan and a home equity loan?

The biggest differences between a home equity loan and a home improvement are that borrowers can get more money, lower interest rates and longer payoff times with a home equity loan, but they have to use their home as collateral. “Home improvement loan” generally refers to an unsecured personal loan used for home improvements. Most personal loans can be used for any purpose and do not require collateral.

Home equity loans also can be...

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How can you get a home improvement loan with no equity?

You can get a home improvement loan with no equity by applying for an unsecured personal loan. You can use a personal loan for almost anything, including home improvements, so it can be a useful way to complete your projects without risking any collateral.

Personal loans base eligibility on your credit history, income, and debt, so you don’t need to own property worth a certain amount of money to take one out. Only home...

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How does a home improvement loan work?

Home improvement loans give homeowners the funds needed to complete projects related to maintaining or increasing the value of a home and the surrounding property, such as remodeling a room, putting on a home addition, or replacing a roof. Although they have a unique purpose, loans for home improvement function just like most other loans. The borrower receives a lump sum of money and must pay it back, along with interest, over a certain number...

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