Can I use a personal loan for home improvement?
Personal loans for home improvement
There’s a lot to consider when embarking on a home improvement project. From the improvements themselves to selecting a contractor to figuring out your financing, they’ll be many decisions to make. And it all starts with your financing.
So, how do you decide which option is right for your specific situation? Here we’ll go over many of the scenarios where a personal loan has advantages.
Do you already know that you need a personal loan for a home improvement project? Learn more about the available personal loan options from Guaranteed Rate.
Are personal loans available for home improvement?
Short answer: yes. Personal loans can be used for a variety of things. You can use your funds for just about anything, including consolidating debt, funding a personal event, or home improvement projects.
Whether you’re looking to redecorate or renovate, a personal loan could come in handy. Make sure your project does not exceed the approved borrowing amount. This will depend on the scope of your project. Personal loans range anywhere from $1,000 to $100,000, though many lenders have maximum loan amounts between $40,000 to $50,000.
Can I use a personal loan for major renovations?
While you can use a personal loan for whatever you’d like to do with your home, a personal loan might not cover all the expenses of a major renovation. But this will greatly depend on the specifics of your project.
A great place to get an estimate of what your potential project might cost is Remodeling Magazine's annual Cost Vs. Value Report. This report gives you estimates that include variations ranging from midrange to upscale, and even includes information about what your return on investment might look like to help you decide when to stick to the basics and when to consider going for the luxury version.
For instance, say you’re considering remodeling your bathroom. According to the report listed above, a midrange remodel would cost approximately $24,424 while an upscale remodel rings in at $75,692; a midrange bathroom addition is estimated to cost $56,946 and the upscale addition is $103,613. So it really depends exactly what your plans include. There are tons of scenarios and projects that fall within some of the personal loan range limits.
Why choose a personal loan over a store credit card?
Personal loans typically offer significantly lower interest rates than credit cards. While the amount you’ll pay for a personal loan will vary depending on your credit score—ranging anywhere from 5% to 30% APR—if you have good credit, you’ll likely get a competitive rate and some flexibility in choosing your repayment terms.
There are credit cards that offer balance transfers or a 0% APR for an introductory period, but even the best of these promotions extend out for only 15-to-21 months. Then once this introductory period is over the APR generally shoots up into the double digits, with some of the best-rated introductory offers adjusting to as high as a 27.99% variable APR.
Besides lower rates, a credit card balance will fluctuate if you’re still using the card for other purchases before paying off your balance entirely. This leaves borrowers unsure of what their payments will look like each month. With a personal loan, you’ll know exactly what you’re going to owe each month because personal loans are generally fixed rate installment loans where the interest rate stays the same for the life of loan. Credit cards often come with variable interest rates that can increase. This allows you to maintain a fixed cost into your monthly budget.
Why choose a personal loan over a HELOC or home equity loan?
A home equity line of credit (HELOC) and a home equity loan both use the equity in your home as collateral. A personal loan does not require any equity or ownership of a home.
Traditional HELOCs allow you access to an open line of credit that you can draw from as needed. They also use your property as collateral. HELOCs can be helpful for situations where you have recurring expenses that can fluctuate, such as medical bills. HELOCs can act as a second mortgage and may have interest rates that are variable.
A home equity loan also involves tapping into your equity and using your property as collateral. However, instead of revolving credit, this type of loan is delivered as a lump sum. Getting approved for a HELOC or home equity loan will depend on the amount of equity you’ve built up. If you’re a relatively new homeowner, these types of loans might not be an option for you.
A personal loan can help you finance a home improvement project. You'll know how much you'll owe each month and how long it will take to pay off the loan.
Personal loans can be particularly helpful in more urgent home improvement matters. Typically the whole process of getting a personal loan—from application to funding—can be completed in just a few days.
Also, personal loans are a great option for issues that require immediate attention. If you’re dealing with a leaky roof, broken appliances or anything that needs to be repaired immediately, a personal loan can save you from having to pay the full amount upfront.
Where can I get a personal loan for home improvement?
Guaranteed Rate offers personal loans ranging from $4,000 to $50,000, with repayment term options from one to five years. The application process is simple and can be completed in about 10-to-15 minutes. The best part is, you’ll find your funds in your bank account within one to two business days. Learn more about the available personal loan options from Guaranteed Rate!