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Property owners who want to add to the price value of their home can do so with home improvement loans.

If you have decent credit and know where to look for the best deal, home improvement loans are easy to get, and highly valuable as a cash resource to maintain and upgrade your home. The effort will potentially add tens of thousands of dollars to the value of your home.

What Are Home Improvement Loans?

A home improvement loan enables the borrower to upgrade his or her property, under loan terms designated by the bank, lender or other financial institution issuing the loan.

Make no mistake, home improvement loans aren't the same as a home equity line of credit or a home refinance loan. Those forms of home loans are more mortgage-loan-oriented; i.e., they're longer, they usually involve larger loan amounts, they're not open-ended (as are bank lines of credit) and they're more difficult to obtain.

There are some similarities to home improvement loans and refinance loans or a bank line of credit. For instance, most home loans are typically secured using the liquidity in your home as capital (although unsecured loans are an option). Additionally, all of the above home loans are dependent on your good financial standing and strong credit to get the best home loans, at the best loan terms.

Home improvement loans offer these factors, as well:

  • Home improvement loans have a wide range of lending amounts - as low as $5,000 or as high as $100,000 in many cases.
  • Interest rates also vary - usually for as low as 3% for borrowers with great credit and up to 18% or more for borrowers with less than stellar credit (or even higher with some online lenders).
  • Depending on the loan amount and the contract terms, home improvement loan payback timetables may be as short as one year, or as long as seven years.
  • Home improvement loan applications are usually vetted quickly, and it's common to be approved for a loan, and have the cash in your bank account within a day or two of approval.
  • Home improvement loans are usually provided by banks, credit unions, and a growing number of online personal loan providers.

Steps Needed to Get a Home Improvement Loan

The process in securing a home improvement loan may be easier than you think - but you'll need to do some homework first. Follow these action steps to secure your home improvement loan:

Be specific about your need for a loan

In general, home improvement loans are tied to a specific home upgrade or maintenance project, like the addition of a furnished basement or the installation of a new kitchen. When you apply for a home improvement loan, your chances of gaining approval rise if you can explain to the lender your actual, specific need for the loan money. For example, if you're using a home improvement loan to add a new deck and patio, say so to the lender. The lender will understand that the loan amount is being used to increase the value of the home and (especially in the case of your mortgage lender, who is also invested in your home growing in value) will see that as a good, credible use of the loan. Thus, they are more likely to green light your home improvement loan.

Ask for a specific amount

Your chances of being approved for a loan will also improve if you avoid asking for too much money, and focus instead on the actual estimated need for your home improvement project. Banks and lenders look favorably on home improvement applicants who have done their homework, and who have a good estimate on the cost of their home improvement project, and the accompanying needed cash amount for their loan.

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Check your credit

Like any loan, a home improvement loan approval largely depends on your personal financial health. Consequently, check your credit score ahead of time and make sure it's adequate for a loan approval. Any credit score over 660 should get you a loan. While you're at it, make sure there are no mistakes or discrepancies on your credit report that could negatively impact your home improvement loan application.

Check the equity in your home

Home improvement loan lenders usually look at the value of your home, as expressed by how much equity (i.e., the money you would pocket if you sold the home today) you have in your property. That's why it's a good idea to know that number, and make sure your lender knows it, too.

Ask if you really need a home improvement loan

Know going in that a home improvement loan will come with repayment obligations that are fixed, enforced and come with relatively high-interest rates. If you can come up with home renovation cash out of personal savings, low-interest credit card, or from a zero-interest loan from a friend or family member, that could save you money in the long run.

How to Get a Home Improvement Loan with Bad Credit

Getting a home improvement loan with bad credit isn't easy, but it is doable. If your credit score is 620 or below, consider these options:


The U.S. Department of Housing and Urban Development (HUD) is more forgiving in its loan approvals than most banks or credit unions. Consider the FHA Streamlined 203(k) program, which provides homeowners up to $35,000 in loans to upgrade their homes. An FHA Title 1 Loan is also available for borrowers with weak credit.

Get a co-signer

If you can get a close friend or relative with stellar credit to co-sign your home improvement loan, you can likely get your loan. Just make sure to agree to terms beforehand, and get it all in writing.

Home Improvement Loan Alternatives 

There are other non-traditional ways to pay for home improvements that go beyond a bank loan. Try these ideas on for size:

Mortgage refinancing

If you are refinance your mortgage to a loan with lower interest rates (and lower payments), you can use the extra cash to pay for your home improvement costs.

A home equity line of credit

A home equity line of credit can provide you with the cash you need for your home improvement projects. Your existing bank is your best bet, but look online for qualified lenders as well.

Your credit card 

If you have a credit card with reasonable interest rates and a high credit ceiling, you can use your card to finance some, if not all, of your home improvement project.