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Home Improvement Loan Rates by State

Author: Finance Editors

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Is a home improvement loan a good idea for your home project? Find below the pros and cons, situations where you should take one, or not. Plus find actual rates for home improvement loans in your state.

 

Updated: May 30, 2024

 

Home improvement loans are personal loans made specifically for financing home improvement or repair projects. These loans are aimed to homeowners who need funds for renovations, remodels, or essential repairs but may not have sufficient equity in their property to qualify for a secured loan.

 

:: Key Facts ::

 

No Collateral Needed (unsecured loan):  Home improvement loans are usually unsecured, meaning you don’t need to use your home or any other asset as collateral. 

Fixed Interest Rates and Monthly Payments: One of the main advantages of these loans is their fixed interest rates and monthly payments. The predictability let you budget easier.

Loan Amount and Terms: They have flexible loan amounts, ranging $1,000 to $50,000, based on  your credit. Repayment terms are usually shorter, 3 to 7 years, than secured loans.

 

Jump to sections

Home Improvement Loans: Pros and Cons

When Home Improvement Loans Mostly Used?

5 Things to Know Before Applying

Home Improvement Loans Rates by State (Survey)

How to Apply for a Home Improvement Loan

Home Improvement Loans vs Other Loan Options

Mistakes to Avoid Funding Home Repairs

Alternatives to Home Improvement Loans

Home Improvement Loans Satisfaction Survey

 
 
 

Pros and Cons

 

Pro: Quick Access to Funds

 

Home repair loans are known for their quick approval process. Once approved, you can access the funds within a few days, making them ideal for urgent repairs or project who need t be done quickly.

 

Pro: Easier Qualification Criteria vs Other Loans

 

Home improvement loans have easier qualification criteria compared to home equity loans or HELOCs. Since they don’t require collateral, the approval process is typically and less complicated, making it a good option for homeowners with not as good credit profiles.

 

Con: Higher Interest Rates Than Secured Loans

 

Since they are unsecured, lenders assume more risk, which is reflected in their higher interest rates. However, for many homeowners, the benefits of not needing collateral and the quick access to funds outweigh this con.

 

Con: Impact on Credit Score

 

Like any loan, home improvement loans can impact your credit score. Repaying on time help improve your credit score over time, but missed payments can negatively affect it. Assess your financial situation to be certain you can meet the repayment terms before taking out a home improvement loan.

 

Who And When Home Improvement Loans Are Mostly Used?

 

There’s no one size fits all situation but in general people get a loan when:

 
  • – You face an urgent repair or improvement.
  • – You don’t have enough savings: using the loan to fill the gap between their saving and cost.
  • – You don’t have enough equity yet in your home for a home equity loan.
 

Common emergency repairs often include:

 
  • – Roof repair
  • – Plumbing problems
  • – Electrical upgrades
  • – Major window repairs
  • – HVAC and furnace repair or change.
 

People from all walk of life use home improvement loans for non-emergencies:

 

Young families: Sometimes need to put a fence in their yard for their kids, or they need to redo a bedroom for the upcoming baby.

Working people and families: Tend to use home repair loans more for emergencies but also do basic upgrade like bathrooms, kitchen, yards. These loans are also popular to make energy efficiency upgrades like installing solar panels, upgrading insulation, or replacing old windows with energy-efficient ones. 

Middle age and retired: Often tends to take a loan to improve their living spaces. Such as adding a deck, redoing a bathroom, doing landscaping, upgrading their kitchen (without a total remodel), modifications to be able to stay longer in their home, etc.

 
 
 

5 Things to Know Before Applying

 

Before you apply, it’s important to know several key factors to make the best financial decision for your situation. Here are the 5 basic facts to keep in mind:

 

1- Credit Score

 

Your credit score plays a major role determining your eligibility for a loan and the interest rates you will be offered.

 
  • – The higher your  score the better loan options and lower interest rates.
  • – Before applying, verify your credit score.
  • – Consider taking steps to improve it if necessary, such as paying down existing debts.
 

2- Loan Amount Needed

 

Determine the total cost of your home improvement or repair project is a must before applying for a loan.

  • – Create a detailed budget that includes all expenses, such as materials, labor, permits, and room for unexpected costs.
  • – Have a clear idea of how much you need to borrow: it will help you avoid taking on more debt than necessary and ensure you have enough funds to complete your project.
 

3- Repayment Terms

 

Understand the repayment terms of your loan in order to better manage your finances.

  • – Home improvement loans usually have repayment periods from 3 to 7 years.
  • – Look how your monthly payments will fit into your budget. You should easily be able to meet your repayment schedule before taking one.
  • – Longer repayment terms may result in lower monthly payments but usually increase the amount of interest paid over the life of your loan.
 

4- Interest Rates

 

Interest rates impact the overall cost of your loan.

  • – Home improvement loans have fixed interest rates: it provides equal monthly payments.
  • – Compare rates from different lenders to ensure you’re getting the best deal. Even a small difference in interest rates can lead to good savings over the loan term.
 

5- Fees and Charges

 

Learn if any fees and charges comes with the loan.

  • – Common fees include origination fees, which are typically a percentage of the loan amount, and prepayment penalties, which may apply if you pay off the loan early.
  • – Also, some lenders may charge late fees or other administrative costs.
 
 
 

Home Improvement Loans Rates by State

 

The rates and satisfaction ratings below are from our Home Improvement Loans survey.

 
 
      Credit Score      Satisfaction* 
  Excellent Good Average Bad Poor  
  720 – 850 690 – 719 630 – 689 580 – 629 below 580  
Nationally 6.6% 9.1% 11.4% 17.1% 24.7% 7/10
Banks 7.1% 9.3% 13.1% 18.6% n/a 6/10
Credit Unions 6.1% 8.6% 11.3% 17.0% 21.1% 8/10
Online lenders 6.4% 9.1% 12.3% 16.0% 33.1% 7/10
Alabama 6.5% 9.1% 12.3% 16.0% 22.3% 6/10
Alaska 6.5% 8.9% 13.0% 17.2% 21.4% 7/10
Arizona 6.4% 9.1% 12.3% 18.1% 21.6% 5/10
Arkansas 6.3% 9.0% 11.7% 17.0% 22.0% 6/10
California 6.3% 8.8% 12.2% 17.3% 21.4% 7/10
Colorado 6.2% 8.3% 11.5% 17.3% 21.4% 8/10
Connecticut 6.1% 8.4% 11.5% 18.5% 21.2% 8/10
Delaware 6.2% 8.9% 13.1% 18.1% 21.0% 7/10
DC 7.0% 9.1% 13.1% 18.0% 22.2% 6/10
Florida 6.4% 9.3% 12.6% 16.9% 20.1% 6/10
Georgia 6.2% 9.3% 13.2% 18.1% 21.1% 5/10
Hawaii 6.3% 9.2% 12.4% 16.8% 24.11 8/10
Idaho 6.4% 9.1% 12.2% 17.3% 20.1% 7/10
Illinois 6.3% 9.1% 11.3% 15.3% 23.4% 8/10
Indiana 6.4% 9.1% 13.3% 18.1% 22.2% 6/10
Iowa 7.0% 9.2% 13.5% 18.6% 24.0% 7/10
Kansas 7.0% 9.2% 13.3% 18.2% 23.1% X/10
Kentucky 6.6% 9.3% 13.3% 17.1% 21.1% 5/10
Louisiana 6.4% 9.0% 12.4% 18.1% 21.5% 6/10
Maryland 6.5% 9.2% 13.2% 17.4% 23.0% 8/10
Massachusetts 6.4% 9.0% 12.4% 17.7% 22.4% 9/10
Michigan 6.4% 9.2% 13.5% 17.5% 24.3% 7/10
Minnesota 6.6% 9.8% 14.0% 18.2% 24.1% 9/10
Mississippi 6.4% 9.2% 13.3% 18.3% 22.1% 4/10
Missouri 7.1% 10.0% 14.0% 17.4% 24.3% 7/10
Montana 6.7% 9.7% 13.7% 17.2% 20.1% 8/10
Nebraska 6.6% 9.6% 13.4% 17.5% 19.7% 8/10
Nevada 6.6% 9.6% 13.8% 18.3% 22.3% 7/10
New Hampshire 7.1% 9.6% 15.3% 18.4% 23.2% 9/10
New Jersey 6.5% 9.2% 13.0% 17.3% 19.5% 8/10
New Mexico 6.5% 9.2% 12.4% 16.5% 21.0% 6/10
New York 6.4% 9.3% 12.2% 16.6% 20.1% 8/10
North Carolina 6.4% 9.4% 13.3% 18.4% 23.1% 7/10
North Dakota 7.0% 9.4% 12.3% 16.2% 19.5% 9/10
Ohio 6.6% 9.2% 12.3% 16.1% 21.0% 8/10
Oklahoma 6.5% 9.3% 13.2% 18.3% 20.3% 6/10
Oregon 6.6% 9.4% 12.9% 17.2% 21.1% 9/10
Pennsylvania 6.8% 9.3% 12.6% 18.6% 21.1% 9/10
Rhode Island 7.0% 9.2% 12.6% 15.2% 21.0% 9/10
South Carolina 6.6% 9.1% 13.6% 18.4% 22.2% 6/10
South Dakota 6.1% 9.2% 12.8% 16.5% 21.1% 6/10
Tennessee 6.2% 9.2% 12.3% 16.5% 22.5% 7/10
Texas 6.5% 9.2% 13.3% 17.7% 22.4% 6/10
Utah 6.6% 9.2% 12.3% 15.6% 20.6% 9/10
Vermont 6.4% 9.3% 12.4% 16.1% 20.1% 9/10
Virginia 6.6% 9.2% 13.3% 17.6% 20.1% 9/10
Washington 6.4% 9.0% 14.1% 18.9% 22.2% 9/10
West Virginia 6.7% 9.3% 13.3% 16.3% 21.1% 6/10
Wisconsin 7.2% 9.2% 15.1% 16.5% 20.1% 8/10
Wyoming 5.9% 9.1% 14.0% 16.2% 19.0% 6/10
Satisfaction * 8/10 9/10 8/10 7.5/10 7/10  
Source: MFP’s Home Improvement Loans Survey (over 4,811 users) who shared home improvement loan annual percentage rate (APR) between May 1 to 30 2024.
 
 
 

How to Apply for a Home Improvement Loan

 

Here’s a step-by-step application process:

 

Research and Compare Loan Options

 
  • – Explore various lenders and their loan products.
  • – Compare interest rates, loan terms, fees, and other conditions to find the best option for your needs.
  • – Start with your own bank since you already have a relationship with them.
  • – You should also look at local Credit Unions since they regularly offer better rates or online lenders, who are usually the fastest provide a loan.
 

Check Your Credit Score

 
  • – Obtain a copy of your credit report and review it for accuracy.
  • – Take care of any discrepancies or issues that could negatively impact your credit score.
 

Gather Necessary Documents

 
  • – Collect proof of income, such as pay stubs, tax returns, and bank statements.
  • – You may have to document of your home’s value, which is included in an appraisal or property tax assessment.
  • – You may have to provide a detailed estimates and budgets for your home improvement or repair project, including materials, labor, and any other associated costs.
 

Submit Application

 
  • – Complete the loan application with all required information.
  • – Ensure all supporting documents are submitted accurately and promptly.
  • – After submission, wait for the lender to review your application and make a decision.
  • – Review the loan offer carefully to understand the terms and conditions before accepting.
 
 

Tips to Increase Your Chances to Have Your Loan Accepted

 

Improve Your Credit Score

 
  • – Focus on paying down outstanding debts and avoid missing any payments.
  • – Consider holding off on applying for new credit accounts until after your loan is approved to maintain a higher credit score.
 

Reduce Existing Debts

 
  • – Lower your debt-to-income ratio by paying off existing loans and credit card balances.
  • – This not only improves your credit score but also increases your likelihood of loan approval and can potentially lead to better loan terms.
 

Have a Clear and Realistic Project Plan

 
  • – Outline the specific details of your home improvement project, including objectives, timelines, and costs.
  • – Providing a well-thought-out plan shows lenders that you have thoroughly considered the project and are prepared to manage the funds responsibly.
 
 

Home Improvement Loans vs Other Options

 

When considering financing options for home improvements, it’s important to understand how home improvement loans compare to other types of loans. Here’s a breakdown of key alternatives:

 
 

Home Equity Loans

 

A home equity loan allows homeowners to borrow against the equity in their home. It provides a lump sum amount with a fixed interest rate and fixed monthly payments.

 

Home Equity Loans vs Home Improvement Loans

 

Interest Rates: Generally lower than unsecured personal loans due to the collateral involved.

Qualification Criteria: Requires sufficient home equity and a good credit score.

Repayment Terms: Typically longer terms, ranging from 5 to 30 years.

Risks: Your home is used as collateral, meaning you could lose your home if you have to default on the loan.

 
 

Home Equity Line of Credit (HELOC)

 

A HELOC is a revolving line of credit based on the equity in your home, functioning similarly to a credit card. It offers flexibility to borrow as needed during the draw period, with variable interest rates.

 

HELOC vs Home Improvement Loans

 

Flexibility: More flexible than a lump sum loan; borrow as needed up to the credit limit.

Interest Rates: Often lower than personal loans but variable, which can lead to fluctuating monthly payments.

Draw Period: Typically 10 years, followed by a repayment period of 10-20 years.

Repayment Terms: Interest-only payments during the draw period, with full repayment required afterward.

Risks: Home as collateral, potential for rising interest rates, and the need for careful financial management.

 
 

Cash-Out Refinance

 

A cash-out refinance replaces your existing mortgage with a new one for a larger amount, providing the difference in cash. It allows you to access home equity without taking out a second loan.

 

Cash-Out vs Home Improvement Loans

 

Loan Amount: Depends on your home’s current value and the amount of equity you have built.

Interest Rates: Can be lower than personal loans, but refinancing means you start a new mortgage term.

Impact on Existing Mortgage: Your original mortgage is replaced, which can extend the repayment period.

Closing Costs: Can be substantial, similar to the costs of the initial mortgage.

Risks: Your home is at risk if you fail to make payments, and you may end up paying more interest over time.

 
 

FHA Title I Property Improvement Loan

 

The FHA Title I home improvement loan is guaranteed by the Federal Housing Administration (FHA) and is available to homeowners for property improvements. It is designed for those who may not have significant home equity.

 

FHA Title I vs Home Improvement Loans

 

Interest Rates: Generally lower due to government backing, but may vary by lender.

Qualification Criteria: More lenient than conventional loans, making it accessible to those with moderate credit.

Government Backing: Provides a level of security for lenders, potentially resulting in better terms for borrowers.

Loan Limits: Capped at $25,000 for single-family homes, which may limit the scope of larger projects.

 
 
 

Common Mistakes to Avoid Funding Home Repairs

 
  • – Taking on more debt than you can handle
  • – Not comparing multiple loan offers
  • – Ignoring the fine print and hidden fees
  • – Failing to plan for unexpected expenses
 
 
 

Alternatives to Home Improvement Loans

 

Explore all available alternatives to find the best fit for your financial situation and project needs.  Here are some options:

 
 

Saving Up : Pros & Cons of Paying Out-of-Pocket

 

Pros:

  • – No interest or fees, making it the most cost-effective option.
  • – No impact on your credit score or debt-to-income ratio.
  • – Full control over your budget and spending.
 

Cons:

  • – Requires significant time and discipline to save the necessary funds.
  • – Delays in starting your project until enough savings are accumulated.
  • – Potential for unexpected expenses to deplete savings, delaying the project further.
 
 

Credit Cards : When It Might Be Appropriate to Use Them

 

Pros:

  • – Convenient for smaller projects or emergency repairs.
  • – Some credit cards offer 0% introductory APR periods, allowing interest-free borrowing for a set time.
  • – Potential for earning rewards or cashback on purchases.
 

Cons:

  • – High-interest rates can lead to substantial costs if you don’t pay the balance off quickly.
  • – Risk of accumulating debt if you do no managed it carefully.
  • – Lower credit limits compared to other financing options may restrict the scope of larger projects.
 
 

Government Grants & Programs : Available to Some Homeowners

 

Most programs are offering through cities and counties across the country. Most states also have their home repair loans and rural homeowners have home improvement grants and loans programs from the USDA.

 

Pros:

  • Home improvement and repair grants do not need to be repaid, making them an excellent financial boost for eligible homeowners.
  • – Programs may offer low-interest loans or assistance with specific types of home improvements, such as energy efficiency upgrades or essential repairs like upgrades to building code.
  • – Grants programs usually target lower-income households, veterans, seniors, and individuals with disabilities.
  • – Loans programs usually target a broader set of homeowners.
 

Cons:

  • – Strict eligibility criteria sometimes limit access to these programs.
  • – Application processes may be lengthy, require detailed documentation.
  • – Funding may be limited or program’s budget depleted.
 
 
 

Home Improvement Loans Satisfaction Survey

 

The survey collect information after members got their home improvement loan. We collect data on the following 6 criteria:

 

Rate & Fee Satisfaction:

 

Interest Rate: Satisfaction about the interest rate they received vs the rate they were offered.

Overall Fees: Satisfaction with the total fees associated with the improvement loan.

 

Process Evaluation:

 

Application Process: Ease of completing the application process.

Communication: Clarity and frequency of communication from the lender throughout the process.

Speed: Speed of the overall loan process.

Overall Satisfaction: Rating for the loan experience with this lender.