When tackling a home renovation, the costs can add up quickly. A seemingly small kitchen remodel can leave you on the hook for thousands of dollars.
The right loan can make or break your home renovations. Whether you are looking for a specialized home improvement loan for a specific type of renovation or a broad loan that can be used to fund more general home upgrades, you’ll find plenty of options to choose from.
Let’s explore the best loans for home improvement and which ones might suit your specific needs and finances.
Check your eligibility for a loan to improve your home. Start here (Jul 1st, 2026)
What is a home improvement loan?
A home improvement loan is any type of loan that offers the funds you need to maintain, repair, or improve your home.
Often, “home improvement loans” are unsecured personal loans that are marketed as being for home improvement. There are also some niche mortgage loan products intended to be used for certain types of home renovations.
Of course, when looking for a way to finance home improvements, you aren’t limited to loans specifically designed for this purpose.
In fact, there are a number of cash-out or home equity loan products to choose from, which allow you to access cash from your home equity for any purpose, including to cover the cost of improvements to your home.
How does a home improvement loan work?
The way your home improvement loan works will depend on what kind of loan you choose.
For homeowners looking to fund home repairs or improvements with a secured loan — either a cash-out refinance or a second mortgage — you’ll need to complete many of the same steps that were required for your original home purchase loan application. Below, we’ll explain the practical differences between a cash-out refinance, a home equity loan, and a home equity line of credit (HELOC).
These types of mortgages require a full mortgage application, a home appraisal, and closing costs or fees. When you close the loan, you’ll receive funds (or in the case of a HELOC, a line of credit ) that you can use for any purpose.
For an unsecured personal loan, you won’t need collateral to finalize the loan. That means there’s no mortgage application or appraisal; you’ll simply qualify based on your credit and can usually receive funds much faster. A regular unsecured home improvement loan will come with installment payments spread out over a loan term. These loans typically have much higher interest rates than mortgages.
Check your eligibility for a loan to improve your home. Start here (Jul 1st, 2026)
Home improvement loans vs equity financing: What’s the difference?
The loans often marketed as “home improvement loans” are typically unsecured personal loans, which means they are a way to get cash relatively quickly for renovations without using your home as collateral. Because they’re unsecured, they typically carry higher interest rates and lower maximum loan amounts than secured loan options.
On the other hand, equity financing involves using the equity you’ve built in the home as collateral for the loan. With that, you are putting your home on the line. If you cannot keep up with the loan payments of a secured home improvement loan, you risk losing your home.
Finally, if you choose a mortgage loan to fund your renovations, you’ll need to make sure to factor closing costs into your budget — which typically add anywhere from 2 to 5 percent of the loan amount to the overall cost of the loan (though this can usually be included in the loan amount).
How to finance home improvements
When looking for a way to finance home improvements, you have many options. But you’ll have to decide which loan option is the right fit for your finances.
Here’s a closer look at some of your financing options for a home improvement project.
1. Home equity loan
With a home equity loan, you’ll borrow against the equity you’ve built in your home.
You can determine how much equity you have in a home by subtracting your outstanding mortgage balance from the home’s value. For example, if your home is worth $100,000 and you have a $20,000 mortgage, then you have $80,000 in home equity. Though, keep in mind that most lenders won’t allow you to borrow all of the equity you’ve built in the home.
A home equity loan is a second mortgage. That means you’ll repay it in addition to your existing mortgage, so lenders will want to make sure your financial situation enables you to make both payments.
You’ll receive the loan in a lump sum of cash and pay it back in regular monthly payments over a predetermined number of years.
If you have a substantial amount of home equity and know what the home improvement project will cost, then a home equity loan is a useful option.
2. HELOC
A HELOC, or home equity line of credit, offers another way to borrow from your home’s equity without undergoing a mortgage refinance. It’s also a second mortgage but differs from a home equity loan in that, instead of taking out a lump sum, you’ll have access to a revolving line of credit to tap into when needed.
HELOCs provide a relatively flexible way to get the cash you need for a project. But if you don’t have the exact costs nailed down, you’ll have the freedom to continue borrowing up to the credit limit for a set period of time. It’s a useful way to avoid overborrowing for a major project.
Although the rates tend to be higher than a home equity loan, HELOCs offer the flexibility that some borrowers need.
3. Cash-out refinance
With a cash-out refinance, you’ll take out a new mortgage loan that replaces your existing mortgage. This new mortgage will convert some of your existing equity into cash that you’ll receive at closing, and you’ll be left with a single monthly mortgage payment.
Cash-out refinancing is usually a good option if you can lock in a lower interest rate for your mortgage than you had previously. Otherwise, it is more efficient to hang onto your existing low mortgage rate and use a different loan option to finance the improvements.
Related: 5 Things to Consider Before Your Cash-Out Refinance Application
Check your eligibility for a cash-out refinance. Start here (Jul 1st, 2026)
4. FHA 203k rehab loan
Like the cash-out refinance option, the FHA 203k loan is a that combines both the cost of the home purchase and the cost of renovations into a single mortgage. It allows you to borrow against the future value of the home, a value that reflects the planned renovations and repairs.
Typically, this type of loan is best for those buying a fixer-upper. With relatively flexible credit requirements and low down payment options, it’s a useful option for many borrowers — especially first-time home buyers.
5. Personal loan
Some personal loans present themselves specifically as home improvement loans. But even if a personal loan isn’t marketed to cover home improvement costs, it offers an unsecured source of funds that can be used for any purpose.
Since personal loans are unsecured, you won’t have to put up your home as collateral. That means it’s often faster to obtain your funds through a personal loan’s online application. Unfortunately, because they’re unsecured, you’re also likely to end up with higher interest rates and a shorter repayment period, which could strain your budget.
If your credit history isn’t great, you may have a harder time qualifying for this type of loan. Additionally, you should scope out any potential prepayment penalties before moving forward with this loan type.
6. Credit cards
A credit card is an expedient way to cover home improvement costs. All you have to do is pull out your plastic.
Although it’s a quick option upfront, borrowing costs are relatively high with credit cards. Even with excellent credit, you’ll find higher annual percentage rates (APRs) that can add up quickly.
Unlike some of the other options on this list, credit cards come with a variable interest rate instead of fixed interest rates. With that, how much you pay in interest will change over time.
If you are dealing with a home improvement project that has to be completed immediately, a credit card offers a short-term funding solution. But after the fire is out, look for a loan with a lower interest rate to stop credit card debt from spiraling out of control.
7. Home improvement grants
Some home improvement projects are eligible for grants, which can lower your out-of-pocket costs. Since grants don’t have to be paid back, it can be a valuable use of your time to research your options.
On the federal level, many agencies offer grants for specific home improvements. For example, the Department of Veterans Affairs provides grants to help veterans with service-connected or aging-related disabilities make their homes more functional.
Similarly, check out the U.S. Department of Housing and Urban Development to see if you qualify for grants based on your location, income, and improvement.
Tips for choosing a home improvement loan
Before jumping into a home improvement loan, start by creating a cost estimate. The size of the loan you need will have an impact on your choices.
If you need tens of thousands of dollars, then tapping into your home equity with a secured loan is likely the right move. But if you only need a few thousand dollars, then a personal loan or home improvement grant might be sufficient to cover your costs.
Additionally, the timeframe matters. For those with good credit and a pressing need, you can finalize the loan application for a personal loan quickly. So, if you need the funds in your bank account as soon as possible, the same day or next business day funding offered by the application process of some personal loans is appealing.
Regardless of the loan option you choose, make sure to take a look at all of your loan offers to find the best possible deal for your situation. Also, make sure you’re clear on the repayment terms before you sign, and ask your lender about any late fees or autopay discounts that could impact your total costs.
Home improvement loan rates 2026
The interest rate you pay for a home improvement loan will vary greatly depending on the type of loan you choose and the current rate environment.
Depending on the rate you are able to lock in and your creditworthiness, a secured loan — either a second mortgage or cash-out refinance — is likely to offer lower rates than an unsecured personal loan or a credit card.
Check your cash-out refinance interest rates. Start here (Jul 1st, 2026)
Loans for home improvement FAQ
Which loan is best for a house that needs improvements?
If a home needs improvements, the right loan option will vary. For example, if you are buying a fixer-upper, then an FHA 203k loan could be the way to go. But if you are a homeowner with significant equity in your home, then a home equity loan or HELOC might be the better option.
What is the best way to get money for home improvements?
Using a home equity loan or HELOC to secure a lower interest rate could lead to thousands in savings. But if you aren’t willing to put your home on the line, then consider a personal loan or credit card instead.
How many years is a home improvement loan?
The home improvement loan you choose will impact the loan term. But in general, you’ll find options that range from two to 30 years.
How do home improvement loans work?
The type of home improvement loan you choose impacts its process.
If you choose a home equity loan or personal loan, you’ll make regular monthly payments in addition to your mortgage. If you choose a cash-out refinance or FHA 203k loan, you’ll only have one monthly payment that rolls your home improvement costs and your mortgage payment into one amortized payment.
What are home improvement loan rates?
Home improvement loan rates vary based on your credit profile and other financial details. Cash-out refinances typically have the lowest rates, while home equity loans and HELOCs are slightly higher. Unsecured borrowing for home improvements, like using personal loans and credit cards, has the highest rates of all. When choosing the right loan, shop around to find the lowest rates for your situation.
How much can you borrow with a home improvement loan?
The amount you can borrow with a home improvement loan varies based on the loan type and your situation. Borrowers with a significant amount of equity can borrow more than those less equity accrued in their homes.
But in general, you should expect to borrow between a minimum loan amount of $1,000 and a maximum loan amount of $50,000 or more.
Can I borrow more on my mortgage for home improvement?
Yes, you can borrow additional funds for home improvement using a cash-out refinance. Essentially, this type of loan replaces your existing mortgage loan with a bigger one.
What credit score do I need to qualify for a home improvement loan?
Creditworthiness requirements vary based on the type of home improvement loan you choose.
For cash-out refinances and FHA 203(k) loans, you’ll likely need a credit score of at least 620. If opting for a HELOC or home equity loan, you’ll likely need a score of at least 660. For credit cards and personal loans, borrowers with credit scores above 700 will find the most affordable rates.
Lenders will also check your credit report. So, if you have a bankruptcy in your past, that could affect your eligibility. Additionally, lenders will calculate your debt-to-income ratio to make sure you can reasonably afford the loan.
The bottom line: Best loans for home improvement
Ultimately, the best home improvement loan for your situation is going to depend on the specifics of your financial situation — and the home renovations you want to make. A mortgage lender can help you determine the best option for you.
Check your eligibility for a loan to improve your home. Start here (Jul 1st, 2026)
