Best Renovation Loans for April 2024

Nearly any personal loan can be used for home renovations. So, if you're looking to remodel your kitchen, upgrade baths, or build a patio, an unsecured personal loan from your bank, credit union, or an online lender will do the trick. We've combed through lenders to find those offering some of the best personal loans.

A home renovation loan or home improvement loan is a type of personal loan. Since most of the best personal loan lenders don't ask why you want to borrow money, you can use the funds on anything that strikes your fancy -- including as an unsecured home improvement loan. If your kitchen is so outdated June Cleaver would be right at home, you may be ready to modernize with the latest kitchen appliances and designs. And if your sump pump has stopped working and you have a flooded basement, you may need to make a home improvement. A home improvement loan is not your only option, but it may be one of the best.

Most of these loans are distributed in a lump sum you repay on a monthly basis. If your credit score is high enough, lenders offer you their best interest rates and repayment terms. If not, you may still qualify for a loan, but can expect to pay more in interest.

If you would prefer to tap into your home's equity, it's worth looking into a home equity loan or a line of credit (HELOC). A cash-out refinance is another way to finance home improvements. Mortgage terms vary, so check with your lender if you're considering one of these options.

READ MORE: How Much Personal Loan Can I Get?

Many people finance home improvements with renovation loans. Here are some commonly-financed projects:

• Bathroom remodel
• Deck installation
• Kitchen remodel
• Pool installation
• Roof replacement
• Solar panels

You can also use a loan to finance emergency home repairs.

The perfect loans for renovations offer a combination of low interest rates, comfortable repayment terms, and the right amount of money. The best way to get to the ideal loan is to ask yourself a few questions.

Do I want a secured or unsecured loan? With an unsecured loan, your signature serves as your promise of repayment. With a secured personal loan, you agree to put something of value up as collateral. This could be your home, vehicle, jewelry, property, or retirement plan. Secured loans feature lower interest rates. That's because lenders know that their interests are protected if you default on payments. In your loan shopping, choose the type of loan that best serves your needs.

Is my credit score high enough to land a low interest rate? Interest rates vary widely depending on your credit history. A higher score reassures lenders that you have a strong history of repaying debt on time. Lenders also want to know you earn enough money to cover the monthly payments. If your score is low and the renovations are not urgent, it may be best to pause the renovation process. First, improve your credit score enough to qualify for the best interest rates and terms. Your wallet will thank you.

Am I ready to take on the debt? None of us knows what the future holds. Even if you score a lower interest rate, ask yourself if you have an emergency fund in place with enough money in it to cover three to six months' worth of bills if anything goes wrong. Also review your monthly budget and make sure you can cover the monthly payment easily. No home renovation loan is worth sleepless nights.

A personal loan is not your only path to home renovation. Here are some alternatives:

Cash: Cash is the best way to finance improvement projects, provided you have extra funds. Spending cash from your savings account means you know precisely how much you can afford to spend. Most importantly, it means you don't have any new debt.

Pay as you go: If you cannot afford to pay for an entire home renovation project at once, pay as you go. Let's say you abhor your current bathroom and want a total remodel. Perhaps you retile the floors when the funds are available. Months later, you paint the cabinets and replace the hardware. Doing a little at a time allows you to avoid more debt. In addition, taking your time gives you space to think about your renovations in detail.

Credit card: Using a credit card for a small renovation or home repair makes sense only if you qualify for a credit card with a 0% promotional APR. It's essential to remember how long the promotion lasts (typically 12 to 18 months). The moment the promotion expires, the interest rate on the card will revert to its regular rate.

Home equity loan: This type of loan uses the collateral in your home to finance your loan. A home equity loan typically offers a lower interest rate. That's because lenders know that if you fail to make payments they can repossess your home, sell it, and recoup their losses.

Home equity line of credit (HELOC): Another type of secured loan is a HELOC. What sets a HELOC apart from a home equity loan is that a HELOC allows a borrower to open a revolving line of credit and tap into home equity as needed. Once you receive loan approval, you're offered a borrowing limit. Say you borrow $40,000. Once that money is repaid, you can borrow that amount again until the loan term ends. One thing to keep in mind is that your payment can change, based on how much you borrow at any given time.

Cash-out refinance: If you want to make home renovations while taking advantage of current low mortgage refinance interest rates, a cash-out refinance is a viable option. Imagine that your home is worth $300,000, but you only owe $150,000. That means you have $150,000 in home equity. Say your home needs $50,000 in renovations. You refinance the mortgage at today's low rate and pull out $50,000 to complete the projects around your house. Keep in mind that you now have $50,000 less in home equity, but you didn't go deep in debt to improve your home.

HomeStyle® Renovation loan: A HomeStyle® loan is backed by the federal government through the Fannie Mae program. It's available to new buyers and to homeowners who would like to refinance a mortgage and add enough to the principal to make home renovations.

VA loan: Similar to the home improvement mortgage loans mentioned, the Veteran's Administration now backs the VA renovation loan, incorporating the cost of home improvements into the primary loan. This VA loan covers both the cost of financing (or refinancing) a home and upgrades.

FHA 203k loan: Roughly speaking, the 203k loan is the FHA's version of the HomeStyle® Renovation loan or VA loan with home renovation capabilities. With as little as 3.5% down, an FHA borrower can take out enough money to purchase a home and make renovations using one simple mortgage.

Whether your interest in renovation financing has to do with creating your dream home or simply making sure your house functions as it should, you are wise to investigate your options. Take a look at the full costs of several types of renovation loans. In addition to the annual percentage rate you're charged, don't forget to factor in costs like the origination fee (if there is one) and closing costs. Finally, be sure you can easily afford the repayment term included in your loan offer.