Best Renovation Loans to Consider in 2024

Finding the best renovation loan can be tricky. You want good terms, low rates, and a process that's not too complicated. That's why our team of financial experts ranked the best personal loans based on our rating methodology to help you get funded.

This rating methodology evaluates lenders based on loan length, APR, repayment terms, user experience, customer service, credit score history, banking and credit union use, and additional features.

How to Choose The Best Home Renovation Loan

As you compare home renovation loans, there are several important factors to consider. We evaluated our picks based on the following:

• Loan features: Make sure the lender offers the amount you need with a term length you can afford. And pay attention to any restrictions on loan use that would prevent you from using the proceeds for your home improvement project.
• Qualification process: Eliminate any options that require a higher credit score or income than you have. Some lenders may have membership requirements or location restrictions as well. If you want to apply with a co-signer or co-borrower, be sure to narrow down your choices to lenders that allow co-signed or joint applications.
• Interest rates and fees: Consider the full range of APRs and see if you can get a rate estimate. Don’t forget to consider fees like origination fees and prepayment penalties as well.
• Application process: Make sure you understand the process and understand when a hard credit check will be required. If you prefer to transact online, make sure the lender has a quick and easy online application process
• Online user reviews: Independent review sites like Trustpilot can give you an idea of whether customers are satisfied with a particular lender. It’s okay if a lender has a few negative reviews, but serious complaints from a large share of customers is a red flag.
• Customer support: Look at the methods of reaching customer support and their operating hours. Make sure it will be convenient for you should you ever need assistance.
• Perks and bonuses: Some lenders may offer hardship protection programs or more payment flexibility than others. Choose the features that are important to you. Pay attention to the online tools and the transparency of the company’s website as well.

What is a Home Renovation Loan?

A home renovation loan is a financial product designed to fund home improvement projects. These loans can cover kitchen or bathroom remodels, room additions, pool installations, or outdoor upgrades. Instead of saving for years to afford a home improvement, borrowers can obtain this loan and repay it over a set period of time, making home improvements more immediately accessible.

How Do Home Renovation Loans Work?

A home renovation loan works much like any unsecured personal loan. You apply for the amount you need to finance your home renovation project. You’ll receive the funds in a lump sum, minus any origination fee. 

You’ll then repay the loan in fixed monthly payments of principal and interest. Over time, you’ll pay more than the amount you received upfront, but you’ll have the privilege of having access to the cash right away.

How to Get a Home Renovation Loan

Securing a home renovation loan can be straightforward if you know the necessary steps. Here are seven key actions to take to ensure you successfully obtain a loan for your home improvement project:

• Check Your Credit Score: Before applying, ensure your credit score is sound as it significantly influences the loan terms you'll receive. High scores usually translate to better loan terms.
• Understand Various Loan Options: Research home renovation loan options like personal loans and home equity loans to identify the best fit.
• Compare Rates: Look at various lenders for the most favorable interest rates and terms.
• Prepare Documents: Ready your income proof, tax returns, and renovation details for the loan application.
• Apply for a Loan: Choose a lender with suitable terms and submit your application.
• Wait for Approval: Lenders need time to review your application, usually a few days to weeks.
• Review and Accept Terms: If approved, review the loan terms before signing.

How to Use a Home Renovation Loan

Financing can be a great way to tackle larger home renovation projects. Here are some commonly-financed home renovations and their costs according to Remodeling.hw.net, hot tub costs, inground pool installation costs

Home Improvement Loan Rates

The average interest rate on all 24-month personal loans is 11.48%, according to the Federal Reserve, but rates can vary substantially depending on your credit score, term, and borrowing amount. According to the most recent personal loan data from Credible, borrowers paid the following average rates based on their credit score:

Pros and Cons of Home Renovation Loans

Alternatives to Home Renovation Loans

If an unsecured personal loan doesn’t seem like the right fit for your household, there are a few other forms of financing you may consider:

• Home Equity Loan—this is a type of installment loan secured by the equity you’ve built in your home. It’s great for expensive projects because you can borrow up to 85% of your available equity. 
• HELOC—lets you draw against your home's equity. It's more flexible because you can borrow as you go, and you only pay interest on the amount you use.
• Cash-Out Refinance—this is a type of refinancing that replaces your current mortgage with a new loan for more than you previously owed. You get the difference as cash, which you can use to remodel or repair your home. 
• Credit Cards—if the project is small, you might consider using a credit card. Some offer 0% APR for a promotional period, which could be a good deal if you can pay it off before the rate increases.
• Government-Backed Loans—certain government programs such as FHA 203(k) loan, offer loans for specific home improvements, like energy-efficient upgrades.

Conclusion

If you need cash to renovate or repair your residence, there are plenty of financing options to choose from. If you want to avoid a lengthy process with a ton of paperwork, you might prefer the convenience of an unsecured personal loan for your home renovation needs. To help you narrow down your options, we evaluated dozens of lenders to choose the best 10. We suggest comparing your individual rate with a few different lenders on this list before applying to the home improvement lender of your choice. That brand new roof, pool, or deck could be closer than you think.