The 6 Best Home Improvement Loans | 2025

August 4, 2025 - 5 min read

Key Takeaways

  • Choose your home improvement loan based on your project size, timeline, and credit profile.
  • Home equity loans and cash-out refinances typically offer lower rates but require sufficient equity.
  • FHA 203(k) loans are ideal for fixer-uppers, while personal loans and credit cards suit smaller projects.
Check home improvement loan options and rates. Start here

Ready to tackle those home improvements? Whether it’s a small update or a major makeover, there are plenty of loan options out there to help fund your project.

In this article, we’ll break down the six main types of home improvement loans so you can easily find the one that suits your needs best.


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What are the different types of home improvement loans?

If you’re planning home improvements and weighing your financing options, here’s a quick breakdown of the most common loan types.

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Different types of home improvement loans

  • Home Equity Loan: A fixed-rate lump sum borrowed against your home’s equity. Best for large, one-time projects with predictable costs.
  • HELOC (Home Equity Line of Credit): A revolving credit line based on your equity. You borrow as needed, making it ideal for ongoing or phased renovations.
  • Cash-Out Refinance: Replaces your current mortgage with a larger one, letting you take out the difference in cash. Helpful if you want to tap equity and possibly secure a better rate.
  • FHA 203(k) Loan: Government-backed loan that combines the cost of buying (or refinancing) a home with renovation expenses. Offers a low down payment and flexible credit requirements.
  • Personal Loan: A fast, unsecured loan that doesn’t require home equity. Good for smaller projects or when you need money quickly.
  • Credit Card: Offers immediate access to funds for minor upgrades or repairs. May work well if you qualify for a 0% introductory APR period.

Home improvement loan options compared

Loan TypeApproval TimeMin Credit ScoreLoan Amount RangeMax LTV / CollateralInterest Rate TypeFlexible Use
HELOC2–6 weeks620+Up to 85% home valueSecured by home equityVariableYes
Home Equity Loan2–6 weeks620+Up to 80–90% home valueSecured by home equityFixedYes
FHA 203(k) Loan4–8 weeks580+$5,000 – $50,000+Secured by homeFixedRestricted
Cash-Out Refinance4–6 weeks620+Up to 80–90% home valueSecured by homeFixed or variableYes
Personal Loan1–7 days620+$1,000 – $50,000+Unsecured (no collateral)FixedYes
Credit CardMinutes to hours620+Varies, typically <$10KUnsecured (no collateral)VariableYes

Best types of home improvement loans

Now that you’ve seen a quick summary of the different options, let’s take a closer look at each loan type. Understanding how they work, their pros and cons, and who they’re best for can help you make a more confident financing decision.

1. Home equity loan

A home equity loan lets you borrow against the equity you’ve built in your home, which is the home’s value minus your remaining mortgage balance.

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Unlike a cash-out refinance, it doesn’t replace your current mortgage. You’ll keep making payments on your existing loan, plus a separate payment for the new home equity loan.

Home equity loan quick facts

Loan amount80% to 85% of your home’s appraised value minus current mortgage balance
Funding timeline2 to 6 weeks
Repayment term5 to 30 years, with 10 to 15 years being most common
Requirements15% to 20% equity, a 620 credit score or higher, a max DTI of 45%, and sufficient income
Project typeMajor remodels, fixed-cost projects
Ideal candidateEstablished homeowner, strong equity, prefers fixed payments

2. HELOC (home equity line of credit)

A home equity line of credit (HELOC) is another great way to borrow from your home equity without refinancing. A HELOC is similar to a home equity loan, but it works more like a credit card. You can borrow from it up to a preapproved limit, pay it back, and borrow from it again.

Check your HELOC options. Start here

HELOC quick facts

Loan amount80% to 85% of your home’s appraised value minus current mortgage balance
Funding timeline2 to 6 weeks
Repayment term10 to 20 years
Requirements15% to 20% equity, a 620 credit score or higher, a max DTI of 45%, and sufficient income
Project typePhased, ongoing, variable-cost projects
Ideal candidateHomeowner with equity, good credit, flexible

Quick Fact

According to the 2025 Remodeling Impact Report from the National Association of Realtors, 54% of homeowners used a home equity loan or line of credit (HELOC) to fund their latest remodel.

3. Cash-out refinance

Another popular way to get money for a home remodeling project is a cash-out refinance. With this option, you refinance to a new mortgage loan with a bigger balance than what you currently owe. Then you pay off your existing mortgage and keep the remaining cash.

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The money you receive from a cash-out refinance comes from your home equity. It can be used to fund home improvements, although there are no rules that say cash-out funds must be used for this loan purpose.

Cash-out refinance quick facts

Loan amountUp to 80% of your home’s appraised value minus your current mortgage balance
Funding timeline4 to 6 weeks
Repayment term15 to 30 years (based on new mortgage term)
RequirementsAt least 20% equity, a credit score of 620 or higher, stable income, and acceptable debt-to-income ratio
Project typeLarge, one-time, fixed-cost renovations
Ideal candidateHomeowner with strong equity, stable finances, and a higher-rate existing mortgage they can refinance

4. FHA 203(k) rehab loan

An FHA 203(k) rehab loan lets you finance your home purchase and renovation costs with a single mortgage, no need for two separate loans or double closing costs.

Check your eligibility for an FHA 203(k) loan. Start here

It’s a great option if you’re buying a fixer-upper and need funds for improvements right away. Backed by the government, it also offers perks like a low down payment and more flexible credit requirements.

FHA 203(k) refinance quick facts

Loan amountUp to 110% of the home’s projected value after renovations (subject to FHA limits)
Funding timeline4 to 8 weeks
Repayment term15 to 30 years
Requirements580+ credit score, 3.5% down payment, must be used for a primary residence
Project typeNecessary or approved improvements (e.g., structural repairs, modernization); luxury upgrades not allowed
Ideal candidateBuyers purchasing a fixer-upper who want to finance renovations as part of the mortgage

Standard vs. Limited FHA 203(k): What’s the Difference?

The Standard 203(k) loan is for major or structural renovations requiring a consultant, while the Limited 203(k) covers smaller, non-structural repairs and improvements up to $35,000 with a simpler process.

5. Personal loan

If you don’t have enough home equity to borrow from, a personal loan is another way to finance home improvements.

Because a personal loan is unsecured, you won’t use your home as collateral. That means these loans can be obtained much faster than HELOCs or home equity lines of credit. In some cases, you may be able to get loan funding on the next business day or even same-day funding.

Personal loan quick facts

Loan amountTypically $1,000 to $50,000+ (varies by lender)
Funding timeline1 to 7 days (often faster for online lenders)
Repayment termUsually 2 to 7 years
RequirementsMinimum credit score typically 620+, proof of income, and good debt-to-income ratio
Project typeAny home improvement project—no restrictions on use
Ideal candidateBorrowers seeking quick, unsecured funds for small to medium home improvement projects without using home equity

6. Credit cards

You could always finance some or all of your remodeling cost with plastic, too. This is the quickest and simplest financing option for a home improvement project.

But because home improvements often cost tens of thousands of dollars, you need to be approved for a higher credit limit. Or, you’ll need to use two or more credit cards. Plus, you’ll likely pay interest rates that are much higher than those charged by home improvement loans.

Credit cards quick facts

Loan amountVaries by credit limit; typically up to $10,000 or more
Funding timelineMinutes to hours
Repayment termRevolving credit—minimum monthly payments; can pay over months or pay in full
RequirementsCredit approval based on credit score, income, and credit history
Project typeAny home improvement expense, small or large
Ideal candidateBorrowers needing fast, flexible access to funds, who can manage revolving credit responsibly
Check your home improvement loan options. Start here


Additional resources

Looking for more information? We’ve created additional articles that explore specific options for people who may be seeking renovation financing. For a deeper dive, be sure to check out the resources below.

Home renovation loan options

Home improvement loans FAQ

Get started on your home improvement loan. Start here

The best loan for home improvements depends on your finances. If you have a lot of equity in your home, a HELOC or home equity loan might be best. Or, you might use a cash-out refinance for home improvements if you can also lower your interest rate or shorten your current loan term. Those without equity or refinance options might use a personal loan or credit cards to fund home improvements instead.

That depends. We’d recommend looking at your options for a refinance or home equity-based loan before using a personal loan for home improvements. That’s because interest rates on personal loans are often much higher. But if you don’t have a lot of equity to borrow from, using a personal loan for home improvements might be the right move.

The credit score requirements for a home improvement loan depend on the loan type. With an FHA 203(k) rehab loan, you likely need a 620 credit score or higher. Cash-out refinancing typically requires at least 620. If you use a HELOC or home equity loan for home improvements, you’ll need a FICO score of 680-700 or higher. For a personal loan or credit card, aim for a score in the low-to-mid 700s. These have higher interest rates than home improvement loans, but a higher credit score will help lower your rate.

If you’re buying a fixer-upper or renovating an older home, the best renovation loan might be the FHA 203(k) mortgage. The 203(k) rehab loan lets you finance (or refinance) the home and renovation costs into a single loan, so you avoid paying double closing costs and interest rates. If your home is newer or higher-value, the best renovation loan is often a cash-out refinance. This lets you tap the equity in your current home — and you could refinance into a lower mortgage rate at the same time.

Home improvement loans are generally not tax-deductible. However, if you finance your home improvement using a refinance or home equity loan, some of the costs might be tax-deductible.

Disclaimer: The Mortgage Reports does not provide tax advice. Be sure to consult a tax professional for any questions about your taxes.

Infographic showing different types of home improvement loans including Home equity loans, HELOCs, and cash-out refinance

Shop around for your best home improvement loan

As with anything in life, it pays to compare all your options. So don’t just settle on the first loan offer you find. Compare loan types, rates, and terms carefully to find the best loan for home improvements.

Time to make a move? Let us find the right mortgage for you


Erik J. Martin
Authored By: Erik J. Martin
The Mortgage Reports contributor
Erik J. Martin has written on real estate, business, tech and other topics for Reader's Digest, AARP The Magazine, and The Chicago Tribune.
Aleksandra Kadzielawski
Updated By: Aleksandra Kadzielawski
The Mortgage Reports Editor
Aleksandra is an editor, finance writer, and licensed Realtor with deep roots in the mortgage and real estate world. Based in Arizona, she brings over a decade of experience helping consumers navigate their financial journeys with confidence.
Paul Centopani
Reviewed By: Paul Centopani
The Mortgage Reports Editor
Paul Centopani is a writer and editor who started covering the lending and housing markets in 2018. Previous to joining The Mortgage Reports, he was a reporter for National Mortgage News. Paul grew up in Connecticut, graduated from Binghamton University and now lives in Chicago after a decade in New York and the D.C. area.