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Is a Personal Loan Right for Your Home Improvement Project?

Is a Personal Loan Right for Your Home Improvement Project?

Jenius Bank Team
Updated 5/22/2025
• Originally Published 6/16/2023
Borrowing & CreditLifestyle
A couple finishing an online loan application to fund their home improvement project.
Get started on your home improvement project sooner with the proceeds from a personal loan.Are you thinking about remodeling your kitchen, doing some home repairs, or adding a patio in the backyard? You’re certainly not alone! And if you’re lacking the funds to pay for your project, you’re also not alone. Home improvement projects range vastly in price from as little as $1,200 to more than $80,000,1 so covering the full cost of your project out of pocket isn’t always easy.Using a personal loan to finance a home improvement project may be a great option that could help you renovate your home without draining your savings. Since personal loans also tend to offer faster and more flexible funding than some other options, like home equity loans and home equity lines of credit (HELOCs), they could help you get your renovation done faster. But before you apply, make sure that using a personal loan for this project is the right option for your situation.

Key Takeaways

  • Personal loans may help finance your home improvement projects without causing you to dip into your savings.
  • Be sure to compare your loan options to make sure you’re getting the rate, repayment terms, and amount that meet your project’s needs and fit your budget.
  • Depending on the lender you choose, you may receive funds as soon as the next business day, allowing you to get started quickly.

How Personal Loans for Home Renovations Work

Personal loans are popular for financing home improvement and renovation projects because the application processes tend to be quick, and funds are often distributed within a few business days. Personal loans allow you to apply for a specified amount of money. If your loan is approved, you receive that lump sum directly.Personal loans typically don’t have restrictions on how the funds are used, and generally the loans are unsecured, meaning they aren’t guaranteed by any type of collateral like your home or car. Even better, personal loans are known for having fixed monthly payments for a set period (e.g., 36 months) and fewer fees than other lending alternatives, like HELOCs or credit cards.

Why Personal Loans for Home Improvements Are a Good Option

Since personal loans typically have fixed rates, expressed as Annual Percentage Rate (APR), you tend to have more predictable monthly payments over the life of the loan than with a credit card. This could make it easier to budget for your expenses and may save you money compared to financing the project with a variable-rate loan.The structure of a personal loan may also help you preserve your project budget: since the loan amount is fixed, it may force project spending to be fixed too. With a revolving line of credit, like a credit card, you may be tempted to spend more once you start paying the balance down.

Comparing Home Improvement Loans

Finding the right home improvement loan is just as important as finding a trustworthy builder or contractor, so be sure to do your research. As you investigate home improvement loans, there are a few factors to keep in mind.
  • Rates: One of the first things you might want to look at when comparing your loan options is the rate each lender is offering. Your rate may be impacted by factors like your credit score and the repayment term you choose.
  • Repayment terms: Different lenders offer different repayment terms, including the amount of time you have before you must repay the loan and the monthly payment amount.
  • Loan amount: Before you apply, consider how much your project is likely to cost and apply for a loan accordingly. If you borrow more than you need, you may end up paying more interest than necessary.
  • Fees: Some lenders charge fees, such as processing or origination fees, when you take out a loan. Look for lenders that offer the fewest or lowest fees that could help you save money.
By keeping these considerations in mind as you research lenders and financing options, you may have more success finding the best loan for your project and your goals. Remember that it’s okay to shop around and get quotes from several lenders. This helps you compare your options and find a loan that works for your budget.

Other Options to Consider

Personal loans aren’t the only way to finance home improvement projects. Here are some of the options you may want to consider as you’re also researching personal loan options.

Credit Cards

Some people choose to use a credit card to pay for home improvement projects. If you want to go this route, be sure to keep your card’s rate in mind. Since credit card rates are typically higher than other financing options, it may make your home improvement project more expensive.Remember, any balance that you carry over month to month on your card is subject to accruing interest that adds up. You may find that your project ultimately becomes more expensive with this interest, and paying off the balance could be harder as the interest continues to accrue… the end may become a moving goal post.

Home Equity Loans and Home Equity Lines of Credit

Home equity loans and lines let you borrow against the equity in your home without refinancing your existing mortgage. The home equity loan or line is secured by your house, so if you fail to repay, your lender could take possession of your home and use it to settle your debt. As with personal loans, you’re typically free to use proceeds from this debt type however you see fit.Most lenders allow you to borrow between 80-85% of the house’s value, minus what you owe on the mortgage. For example, if your home is worth $300,000 and you owe $225,000 on your mortgage, you’d likely be able to borrow between $15,000 and $30,000.2Home equity loans and lines tend to have more fees and requirements than personal loans. For example, they may require you to have your home appraised and/or to pay closing costs when finalizing the loan, reducing your proceeds.

Cash-Out Refinance

Cash-out refinances allow you to borrow against the equity you have in your home. Most lenders let you borrow up to 80% of your home’s equity, which you could use to pay for your home improvement project. This option works well if you have substantial equity in your home, but it’s important to understand how much your net proceeds would be. Cash-out refinances may require you to pay closing costs and some mortgages may require mortgage insurance premiums, which could reduce your payout.3Unlike home equity loans, refinancing means you’re opening an entirely new loan at a current market rate. You may only want to choose this option if the rate you could get on a refinanced mortgage is lower than what you’re already paying.

Final Thoughts

If you’re considering financing your home improvements, doing the research is important to vet your lending options, especially before applying. A personal loan could be a great option to pay for renovations and upgrades and help you turn your home into the home of your dreams.