Your Practical Guide to Unsecured Home Improvement Loans

You may have borrowed money to buy your house, so why not borrow some more to fix it up? After all, taking out an unsecured home improvement loan can be a convenient way to pay for renovations and repairs.

But it’s really just a personal loan option with a fixed purpose, and it’s not the wisest choice for every homeowner. Here’s what you need to know.

How to find an unsecured home improvement loan

An unsecured home improvement loan is much like an unsecured personal loan. You qualify for a borrowing amount, interest rate, and repayment term based on your credit profile. Many banks, online or otherwise, market their personal loans for home improvement.

But no two lenders are exactly alike. Earnest, for example, promises to consider your education and career in addition to your credit when awarding a loan offer.

Different lenders also allow you to borrow varying amounts. Avant home improvement loans, for example, top out at $35,000. LendingClub has an unsecured home improvement loan maximum of $40,000, which could come in handy for bigger house projects such as building a pool.

These differences spring up from lender to lender, so it’s wise to shop around to find the best personal loan companies.

Besides online lenders, consider credit unions and more traditional banks. They could offer longer loan terms if you prefer repaying the funds over, say, 12 years as with SunTrust instead of 12 to 36 months.

Aside from considering offers from different kinds of lenders, score the best rates on home improvement loans by using these practices:

• Improve your credit score, because mere percentage points can affect how much interest you’ll repay.
• Compare the APR of your offers, as it accounts for both your interest rate and origination fees.
• Avoid lenders with prepayment penalties, rigid repayment plans, and variable rates that could spike.

Weigh the downsides of home improvement loans

An unsecured home improvement loan is an attractive way to make a fix around — or outside — your home. You could replace your broken water heater in the dead of winter, for example, so that you don’t have to freeze while you save up.

But before you go all-in on your home improvement purchase, consider the cons of these loan products.

First of all, home improvement loans — and personal loans in general — can carry burdensome interest rates. Some lenders, such as LendingClub, charge their least creditworthy customers with an APR as high as 35.89%.

Say you have fair credit and can manage an APR of 20.00%. That $15,000 you borrow to remodel your kitchen would cost you $8,845 in interest with a five-year repayment plan, for a total of $23,845.

Plug your borrowing scenario into our personal loan calculator. You’ll see how much your home improvement project will really cost. It might be more expensive than you expected.

Aside from relatively higher interest rates, an unsecured home improvement loan can be dangerous if you select a repayment term that’s too short.

Most personal loans allow you to repay your debt in one, three, or five years. If you need more time to repay your loan, consider lenders that’ll grant you a longer term. Just remember the longer your repayment, the more interest you’ll have to repay.

Consider the alternatives to an unsecured home improvement loan

You might be considering a loan because it will significantly increase the value of your home (although not all renovations do). You could also elect to borrow money because your house needs an emergency repair that’s not covered by homeowners insurance.

Be aware that an unsecured home improvement loan isn’t the only way to get this done.

In the scenario that you have a pressing reason to borrow — holes in your roof, for example — consider the alternatives to unsecured home improvement loans. Your options include:

• Home equity loans: This could be a better option if you’ve paid off a significant chunk of your home but don’t have excellent credit. A home equity loan allows you to borrow a large percentage of your home’s equity — that is, the value of your house minus the amount you still owe on your mortgage. The worst-case scenario is that if repayment goes south, your lender could foreclose on your home.
• Title I Home and Property Improvement loans: This might be a better choice if you plan on borrowing a small amount. You won’t need to secure the loan with your mortgage unless you borrow more than $7,500. The U.S. Department of Housing and Urban Development insures the loan, but you’d still negotiate an APR with an approved private lender in your area.

For home improvement projects that don’t have a time-sensitive deadline, you could save up to avoid borrowing money altogether. Reserving part of your paycheck for an extended period could stack up the funds you need without having to go to a lender.

That’s the best alternative to an unsecured home improvement loan if it’s possible in your situation.

Borrow home improvement loans responsibly

If your home improvement project is more of a passion project, you might seek alternatives to taking on debt.

But if you have a much-needed home repair, excellent credit, and a solid plan for repayment, an unsecured home improvement loan could be the perfect solution. To ensure you’ll benefit, learn how a calculator can help your decision.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!

Lender	Rates (APR)	Loan Amount
1 Includes AutoPay discount. Important Disclosures for SoFi. SoFi Disclosures Personal Loans: Fixed rates from 6.58% APR to 14.87% APR (with AutoPay). Variable rates from 6.275% APR to 12.575% APR (with AutoPay). SoFi rate ranges are current as of July 16, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.275% APR assumes current 1-month LIBOR rate of 2.10% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org) 2 Important Disclosures for Citizens Bank. Citizens Bank Disclosures Personal Loan Rate Disclosure: Fixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount. * Important Disclosures for Upgrade Bank. Upgrade Bank Disclosures Personal Loan Rate Disclosure: Fixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.
	7.73% – 29.99%	$1,000 - $50,000	Visit Upstart Check rate nowon SLH's secure site
	6.28% – 14.87%1	$5,000 - $100,000	Visit SoFi Check rate nowon SLH's secure site
	6.87% – 35.97%*	$1,000 - $50,000	Visit Upgrade
	8.00% – 25.00%	$5,000 - $35,000	Visit Payoff Check rate nowon SLH's secure site
	4.99% – 29.99%	$10,000 - $35,000	Visit FreedomPlus
	5.99% – 18.99%2	$5,000 - $50,000	Visit Citizens
	15.49% – 34.49%	$2,000 - $25,000	Visit LendingPoint
	5.99% – 35.89%	$1,000 - $40,000	Visit LendingClub
	5.49% – 18.24%	$5,000 - $75,000	Visit Earnest
	9.95% – 35.99%	$2,000 - $35,000	Visit Avant