A personal loan gives borrowers an unsecured lump sum that can be used for any purpose. People use personal loans to start businesses, pay for vacations, consolidate debt and more. Like a home improvement loan, but unlike a home equity loan, a personal loan doesn’t require collateral and doesn’t put your home or other assets at risk. That being said, a lower interest rate and/or larger loan amount may be available by getting a secured personal loan rather than an unsecured one. Borrowing minimums are low, as are loan fees, and you can get a personal loan even if you don’t have any home equity. These loans are also typically funded quickly. (For more, see 8 Possible Risks of Unsecured Personal Loans and 6 Ways to Get the Best Personal Loan Rate.)
Loan shopping often starts with mainstream mortgages from banks, credit unions, and brokers. Like all mortgages, they use your home as collateral and the interest on them is deductible. Unlike some, however, these loans are insured by the Federal Housing Administration (FHA) or Veterans Administration (VA), or bought from your lender by Fannie Mae and Freddie Mac, two corporations set up by Congress for that purpose. Referred to as A loans from A lenders, they have the lowest interest. The catch: You need A credit to get them. Because you probably have a mortgage on your home, any home improvement mortgage really is a second mortgage. That might sound ominous, but a second mortgage probably costs less than refinancing if the rate on your existing one is low. Find out by averaging the rates for the first and second mortgages. If the result is lower than current rates, a second mortgage is cheaper. When should you refinance? If your home has appreciated considerably and you can refinance with a lower-interest, 15-year loan. Or, if the rate available on a refinance is less than the average of your first mortgage and a second one. If you're not refinancing, consider these loan types:
Think carefully before you embark on this type of refinance, though: You’ll be using your home as collateral for a bigger loan, and you’ll be financing short-term costs with long-term debt, which adds interest and other fees to the price of the renovations. In most cases, a cash-out refinance is appropriate only if you’re improving your home in ways that will increase its value.
If you have equity in your home and are planning on projects costing $50,000 or more, the best loans to tap will probably be tied to your property. HELOCs, home equity loans, and cash out refinances offer the best rates (30-year fixed mortgage rates are among the lowest we've seen in decades, at 4.06% . A 15-year fixed home loan is currently 3.12%, according to WSJ.) Also, you might be able to deduct the interest on these loans and any points you pay to reduce the interest rate on your taxes (check with a tax advisor, though).
Difficulty getting a loan if you have bad credit or you’re self-employed: you might find it difficult to get approval for an unsecured home improvement loan if you have bad credit. This may also apply if you’re self-employed because you may not have the guarantee of fixed income to meet the monthly repayments. If you are approved, you may then find that you aren’t able to borrow as much as you wanted
A personal loan gives borrowers an unsecured lump sum that can be used for any purpose. People use personal loans to start businesses, pay for vacations, consolidate debt and more. Like a home improvement loan, but unlike a home equity loan, a personal loan doesn’t require collateral and doesn’t put your home or other assets at risk. That being said, a lower interest rate and/or larger loan amount may be available by getting a secured personal loan rather than an unsecured one. Borrowing minimums are low, as are loan fees, and you can get a personal loan even if you don’t have any home equity. These loans are also typically funded quickly. (For more, see 8 Possible Risks of Unsecured Personal Loans and 6 Ways to Get the Best Personal Loan Rate.)

Your credit score: It’s smart to know what are your chances of qualifying before you apply for a loan. Get a free copy of your credit report from each of the major credit-reporting bureaus: Equifax, TransUnion and Experian. You are entitled to one free report a year from each bureau. The most favorable rates go to borrowers with the best credit scores. Every lender you apply with will check your credit score and credit history.
One advantage of these loans is that borrowers can get them very quickly—within a few days or even the same day—less time than it typically takes for a bank to approve a home-equity-based loan or line of credit, says Steve Allocca, LendingClub's president. What's more, you're not putting your home at risk when you borrow this way because it's not used as collateral against the loan. 
You might be eligible for a Title I Home Improvement Loan. A Title I loan is a great option because it's guaranteed by the FHA in the event that you default, so it's a low-risk loan from the standpoint of the lender. Also, it might be your best bet if you have limited equity in your house because Title I loans under $7,500 don't require any pledge of equity.[3]
It’s hard to imagine a scenario in which it makes sense to pay 30% interest to make a home improvement. But if you’re desperate, a peer-to-peer loan with a high interest rate can be a better option than charging the expense to a credit card with a high interest rate because you’ll be forced to repay the peer-to-peer loan within a few years, unlike a credit card balance, which you can drag out and pay interest on forever.
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HELOCs come with a draw period and repayment period. During the draw period, which often lasts about 10 years, you can spend the money in your credit line. Your monthly payments would cover mostly the interest and a little bit of the principal on any outstanding balance. During the repayment period, which typically lasts around 15 years, your monthly payments would probably be higher because they’d include more principal.
Thinking about building a new pool, putting solar panels on the roof, or remodeling the kitchen or bath? When you have good credit, our national online lending division, LightStream, offers unsecured, fixed-rate loans from $5,000 to $100,000. You'll have the cash in your account to pay the contractor when you're ready—as soon as the same day you apply2. Enhance your home and your home's value.
If you tend to have trouble getting out of debt, keeping your finances organized or meeting deadlines, this isn’t a good option for you. Borrowers who are disciplined, detail oriented and spend within their means could find this to be the least expensive option. However, it may not be possible to borrow as much with a credit card as you could with a home equity loan or cash out refinance, depending on how much equity you have and how good your credit is.
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