What Is The Best Loan for Home Improvements?

Quick Answer: If you need fast funding without using your home as collateral, an unsecured personal loan) is typically a better choice. If you have significant home equity and want potentially lower rates, a HELOC may be better.

A home improvement loan is an unsecured personal loan used to finance renovations, repairs, or upgrades to your home without requiring your home as collateral. Lending platforms like Upstart can help borrowers compare personal loan options for home improvements, even if they have limited credit history.

If you have home renovation plans on the horizon but don’t necessarily have the cash in your savings to pay for it in full, there are loan options such as home improvement loans to help you finance the cost of upgrades and maintenance. The type of loan that is best for you depends on your timeline, budget, credit score, and repayment terms that make the most sense for your financial situation.

Home Improvement Financing Options

Here are different home improvement financing options.

• Home Improvement Loan – Fast funding, no collateral; better for defined projects
• HELOC – Flexible borrowing; better for homeowners with significant equity
• Cash-Out Refinance – Lower rates possible; better for large, long-term renovations
• Credit Card – Immediate access; better for small, urgent repairs paid off quickly

Comparison of Home Improvement Financing Options

Financing Option	Collateral Required	Typical APR Range	Funding Speed	Good Fit For
Home Improvement Loan	No	7%–36%	As fast as 1 business day	Quick funding for defined projects without risking collateral
HELOC	Yes	8%–18% (variable)	2–6 weeks	Ongoing projects with flexible borrowing needs
Cash-Out Refinance	Yes	6%–12%	30–45 days	Large renovations when you can secure a lower mortgage rate
Credit Card	No	18%–28%	Immediate (existing cards)	Small, urgent repairs you can pay off quickly

Note: APR ranges are approximate and vary based on creditworthiness, lender, and market conditions.

Eligibility Requirements for Home Improvement Financing Options

Financing Option	Minimum Credit Score	Equity Required	Funding Speed	Collateral Needed
Home Improvement Loan	580–620+	None	1–3 business days	No
HELOC	680–700+	15–20%	2–6 weeks	Yes (home)
Cash-Out Refinance	620+	20%+ typically	30–45 days	Yes (home)
Credit Card	Varies	None	Immediate	No

Note: APR ranges are approximate and vary based on creditworthiness, lender, and market conditions.

1. Home improvement loan

Better for: Borrowers who need fast funding, prefer fixed payments, and don’t want to use their home as collateral.

A home improvement loan can be used for home renovations such as a kitchen or bathroom remodel. It can also be used for smaller, but still costly additions, such as energy efficient windows or solar panels. 

Typical eligibility: Credit scores of 580–620+ depending on lender; no home equity required.

Here’s what you should know about home improvement loans:

• They don’t usually require you to put down collateral, such as your home or car. This is a good thing, in the event that you can’t repay the loan—you won’t lose your house, car, or other assets.
• Because you don’t have to put down collateral, home improvement loans may come with higher interest rates than secured loans such as a HELOC or home equity lines of credit (which require collateral). Not putting down collateral is viewed as more of a risk for lenders. Your interest rate will depend on your credit score.
• They typically have fixed APR and monthly payments which means you know exactly what the full cost of your loan is. The predictability in knowing your monthly payments and interest rate can help you budget.
• Once approved, you can get the funds deposited directly into your bank account—sometimes in as fast as one business day.

2. Home equity line of credit or HELOC

Better for: Homeowners with significant equity who want flexible, revolving access to funds for ongoing projects.

Home equity lines of credit is a loan that works similar to a credit card. Borrowers are loaned a certain amount, pay it down, and may then borrow again—similar to using a credit card and make monthly payments. HELOCs can offer more flexibility because you don’t have to use the entire amount you’re approved for. You only use what you need and the credit line is available for up to 10 years. 

Unlike a credit card, a HELOC is borrowed money from a lender, so you have to pay it back just like you would any other loan. 

Typical eligibility: Credit scores of 680–700+; at least 15 to 20 percent equity in your home required. The amount you qualify for depends on how much home equity you have.

You must have at least 15 to 20 percent equity in your home to be able to go this route. The amount you qualify for depends on how much home equity you have.

Here’s what else you should know about HELOCs:

• The interest rates are adjustable, which means they can change over the life of the loan. However, the interest is only due on the balance, which is the amount you’ve used, rather than the entire credit line. This could help you save some money over the life of the loan.
• Because HELOCs are adjustable, the lender can change the terms of the loan. Let’s say your credit score takes a dip for whatever reason, then the lender can reduce the amount you’re allowed to borrow.
• These loans are a good option if you have smaller renovation projects that are ongoing but aren’t as expensive as a complete overhaul of your home.
• The set loan terms to repay the loan are usually between five and 20 years.

3. Mortgage refinance

Better for: Homeowners with significant equity who plan to stay in their home 5+ years and can secure a lower interest rate.

If interest rates are low relative to your current mortgage rate, refinancing may be an attractive option for homeowners to save money on their mortgages. Refinancing frees up extra cash, either through lower monthly mortgage payments or through a cash out refinance in which you’re borrowing against the equity in your home.

When you refinance, your current mortgage is replaced with a new one, with a new interest rate. You essentially gain the difference if the new loan is larger than the old one—this difference can help fund your home improvement. 

Typical eligibility: Credit scores of 620+; sufficient home equity required (typically 20%+ for cash-out refinance).

Here’s what you need to know about refinancing your mortgage: 

• Refinancing only makes sense if you can secure a lower interest rate.
• Refinancing may be a better option than a HELOC, as long as you plan to stay in your home for more than five years to offset the cost of fees that you’d pay for the refinance. If you plan on moving before five years or if your current mortgage rate is already low, a HELOC might be better.
• Since refinancing involves pulling out a brand new loan, the fees of transacting may be high—this includes an appraisal, origination fees, taxes, and other closing costs.
• If you don’t refinance for a shorter term, you’re essentially extending the life of your loan, making it more costly for you in the long-run.

4. Credit cards

Better for: Small, urgent repairs you can pay off quickly to avoid high interest charges.

Using a credit card to fund your home improvement projects is another option. 

Unlike the other loans listed, credit cards typically come with higher interest rates. The average credit card interest rate is almost 18 percent for new accounts and 14 percent for existing accounts. Going this route may be expensive, unless you have plans to pay your cards off each month. 

Here’s what you need to know about credit cards:

• There are zero percent introductory credit cards, which may give you 12 to 20 months to pay back the card without incurring interest. This is a good route, but only if you can pay it off before the promotional timeframe ends.
• You can earn rewards, miles, and points on your credit cards for big purchases. Being able to grab these rewards from spending on a renovation is great, but only if you have the cash to pay it off each month.
• There’s no waiting around to get approved if you’re planning on using your existing cards to make purchases. This is useful if you have a timely project that needs to be done—such as a burst pipe.
• Keep in mind that if you don’t have high limits for your cards, maxing them out or getting close to maxing them out won’t be good for your credit. 

Find the best loan for your home improvement project

• Choose a home improvement loan if: You need funds within a week, have limited home equity, prefer predictable fixed payments, or don’t want to risk your home as collateral.
• Choose a HELOC if: You have at least 15–20% home equity, need flexible access to funds over time, and are comfortable with variable interest rates.
• Choose a cash-out refinance if: You have significant equity, can secure a lower rate than your current mortgage, and plan to stay in your home for 5+ years.
• Choose a credit card if: You need immediate funds for a small repair and can pay off the balance before interest accrues.

Bottom line

Financing a home improvement project means figuring out which loan is right for your situation and budget. 

The most important thing is having a solid plan that outlines how much the projects will cost and how quickly you can pay off the loan. Securing a lower interest rate is typically best, but keep in mind a longer loan term may lead to more interest paid over the life of the loan, and staying vigilant about your credit score is also important.

Frequently Asked Questions

What credit score do I need for a home improvement loan?
Most lenders require a minimum credit score of 580–620 for an unsecured home improvement loan, though borrowers with scores of 670+ typically qualify for better rates. Requirements vary by lender.

Is a HELOC or personal loan better for home improvements?
It depends on your situation. A personal loan (home improvement loan) is better if you need fast funding, don’t have significant home equity, or don’t want to use your home as collateral. A HELOC may offer lower rates if you have substantial equity and prefer flexible, revolving credit.

How fast can I get funding for a home improvement loan?
Many lenders can fund unsecured home improvement loans within one to three business days after approval. HELOCs and cash-out refinances typically take several weeks due to appraisal and underwriting requirements.

Can I use a personal loan for any type of home improvement?
Yes, unsecured personal loans can generally be used for any home improvement project, from major renovations like kitchen remodels to smaller upgrades like new appliances or landscaping.

Can I get a home improvement loan with bad credit?

Yes, some lenders offer home improvement loans to borrowers with credit scores as low as 580, though approval is not guaranteed and you may face higher interest rates. Improving your credit score before applying can help you qualify for better terms.

What’s the difference between a home improvement loan and a home equity loan?

A home improvement loan is typically an unsecured personal loan that doesn’t require collateral. A home equity loan is a secured loan that uses your home as collateral and requires you to have built up equity in your property.