SS Home Improvement Using personal loans for home improvement projects

Using personal loans for home improvement projects

Using personal loans for home improvement projects

It can be expensive to update your home.

That’s where a personal loan can come in handy. You can use it as an alternative to a Home Equity Line of Credit (HELOC) or Federal Housing Administration (FHA) loan and cover your home improvement projects.

Here’s what you need to know about personal loans for home improvement projects.

What is a home improvement loan?

A home improvement loan is a personal loan you can use to finance just about any home-related project. A few examples include kitchen renovations, solar panel installations, siding replacements, and deck additions.

You may even use a personal loan to repair damage from a natural disaster such as a flood or earthquake if you don’t have insurance or don’t have enough coverage.

Pros and cons

It’s important to consider the benefits and drawbacks of a home improvement loan, including:


  • Fast funding: In most cases, you can receive your loan funds within a few business days. Some lenders will even distribute the money the day you get approved or within 24 hours. Other financing options may come with slower funding times.
  • Fixed monthly payments: A personal loan typically has a fixed interest rate, which means you’ll have the same monthly payment over the life of the loan. HELOCs and credit cards tend to have variable interest rates, which fluctuate and can be difficult to budget for.
  • No collateral needed: Personal loans are usually unsecured, which means they don’t require you to put up an asset as collateral. You can take out a personal loan without putting your home or car on the line.


  • Potentially higher interest rates: Compared to other financing options like construction loans, a personal loan might come with a higher interest rate. This can increase your overall cost of borrowing.
  • Lower maximum amount: Most personal loans cap out at $50,000 or $100,000. If your home improvement project costs more, you might be better off with a HELOC or other option where you can borrow a higher amount.
  • No tax benefits: A home improvement loan won’t help you save on taxes. A home equity loan or HELOC, however, may allow you to reduce your tax burden.

If you do opt for a home improvement loan, be sure to shop around to find the best deals and terms for your unique situation.

Related: Learn more about getting a personal loan

How to apply for a personal loan

If you want to apply for a home improvement loan, follow these four steps:

  1. Review your credit: Go to and request free copies of your credit reports from the major credit bureaus. If you notice any errors, dispute them directly with the appropriate credit bureau. This can increase your credit score and make you eligible for a lower interest rate.
  2. Shop around: Not all home improvement loans are created equal. Do your research and prequalify for loans from multiple lenders without any impact on your credit score. Prequalifying gives you an idea of ​​the loan amounts and terms you may be offered.
  3. Choose a lender and apply: Pick a lender that meets your needs and fill out the application. Most lenders will let you apply online from the comfort of your home or office. Be prepared to submit documents like tax returns and bank statements.
  4. Receive your loan funds: Upon approval, you’ll sign a loan agreement. Then, the lender will disburse your funds, usually via direct deposit. This may take anywhere from one to seven business days.

Related: Learn more about getting a personal loan

Alternative loans

If you decide that a personal loan for home improvement projects isn’t right for you, consider these alternatives:

  • HELOCs: This type of credit line taps into your home’s equity. It comes with a draw period where you only pay interest, followed by a repayment period where you repay what you’ve borrowed. You can draw as much or as little as you need, up to a set credit limit.
    Compared to a home improvement loan, a HELOC usually takes longer to get and is more risky, as the lender may foreclose your home if you default.
  • Home equity loans: Home equity loans are a lot like HELOCs, but they provide a lump sum of money upfront. You’ll repay the loan via either fixed or variable monthly payments over an agreed-upon term.
    If you have equity in your home and know exactly how much your home improvement project will cost, a home equity loan may be a smart choice. As with a HELOC, however, you risk losing your home if you fail to make payments.
  • FHA Title 1 loans: Backed by the US Department of Housing and Urban Development, FHA Title 1 loans come with a fixed interest rate. You can use the funds to cover alterations, repairs and improvements that improve the basic livability or utility of the property.
    With this type of loan, you may borrow up to $7,500 without collateral or $25,000 with your home as collateral.
  • credit cards: Since interest rates on credit cards are usually higher than rates on personal loans, it doesn’t always make sense to put a home improvement expense on a credit card.
    But if you can get a credit card with a 0% APR promotional period, this may be a good idea. You’ll pay no interest on your balance until the introductory period is up. This period can be anywhere between six and 21 months, depending on the card. Keep in mind that if you don’t pay the balance off in time, you’ll begin to accrue interest at the card’s regular rate, which is often high.