Best Bad Credit Home Improvement Loans of 2020 | Find the Best Loan for You

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If you think you’re ready to tackle a major home improvement project, your first question may be how to pay for it. Whether you need to get a new roof or renovate your whole house, a home improvement loan can help you access the money to make it happen.

But qualifying for home improvement loans with bad credit can be a challenge. That doesn’t mean you’re completely out of luck, though. Here’s what you need to know.

The Best Bad Credit Home Improvement Loans of 2020

Bad Credit Home Equity Loans for Home Improvement

  • Bank of America: Best lender with no minimum loan amount.

  • Guild Mortgage Co.: Best lender for financing up to 97% of your home’s appraised value.

  • loanDepot: Best lender for borrowers with FICO scores as low as 500.

  • SunTrust Bank: Best lender for online loan comparison, application and documentation.

Best lender with no minimum loan amount.

A major financial institution serving homeowners nationwide, Bank of America has good customer satisfaction ratings. The bank has an A+ Better Business Bureau rating and a J.D. Power rating of four, which is better than most.

Highlights:

  • Mortgage types offered: Conventional, VA, FHA, refinance, home equity
  • Minimum FICO score: 620
  • Maximum loan-to-value ratio: 100%
  • Maximum debt-to-income ratio: 55%
  • Loan amounts: Up to $5,000,000
  • Total closing costs: Varies
  • J.D. Power overall satisfaction rating: Four out of five

Best Features

  • Bank of America has a wide variety of mortgage products.

  • The lender offers annual percentage rate or closing cost discounts for qualifying Bank of America and Merrill Lynch clients.

  • Home equity lines of credit have no annual, balance transfer or cash advance fees or closing costs.

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Best lender for financing up to 97% of your home’s appraised value.

Guild Mortgage serves homebuyers nationwide with multiple mortgage options. Mortgage shoppers can choose from conventional or agency loans with this lender, which has an A+ BBB rating and a four out of five J.D. Power satisfaction rating.

Highlights:

  • Mortgage types offered: Conventional, FHA, VA, USDA, ARM, Home equity loans, Refinancing (conventional), Refinancing (FHA), Refinancing (VA), Refinancing (USDA), First-time homebuyer program, Jumbo, renovation, expanded (non-qm)
  • Minimum FICO credit score: 620
  • Maximum debt-to-income ratio: 50%
  • J.D. Power satisfaction rating: Four out of five

Best Features

  • Good customer service ratings.

  • A broad range of mortgage products.

  • Special mortgage programs including ones for first-time homebuyers and buyers of manufactured homes.

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Best lender for borrowers with FICO scores as low as 500.

LoanDepot was established in 2010 and since then has financed more than $70 billion in mortgages. It offers FHA, conventional and other mortgage options. Borrowers may qualify for a loan with a FICO credit score as low as 580.

Highlights:

  • Mortgage types offered: Conventional, FHA, VA, ARM, Refinancing (conventional), Refinancing (FHA), Refinancing (VA), Home equity loans
  • Minimum FICO credit score: 500 with conditions
  • Maximum debt-to-income ratio: 43% for FHA
  • Maximum combined loan-to-value ratio: 90%
  • J.D. Power satisfaction rating: Four out of five

Best Features

  • LoanDepot mortgages have a lifetime guarantee, which means if you ever decide to refinance an existing loanDepot loan, the company will waive the lender fees and reimburse appraisal fees.

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Best lender for online loan comparison, application and documentation.

Headquartered in Atlanta, SunTrust Bank offers mortgage loans through branches in 12 states and the District of Columbia. Purchase loans are available for first-time and repeat buyers, with refinance loans available to existing homeowners.

Highlights:
Mortgage types offered: Conventional, FHA, VA, USDA, ARM, Home equity loans, Home equity line of credit, Refinancing (Cash Out), Agency Affordable Financing, Agency Plus Financing (High Cost Home Financing), Jumbo and Doctor Loan Program
• Minimum FICO score: N/A
• Max DTI: 43%
• J.D. Power satisfaction rating: Three out of five

Best Features

  • FHA, USDA and VA loans are available.

  • Special terms are offered to medical professionals.

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Bad Credit Personal Loans for Home Improvement

  • Discover: Best lender charging only late fees.

  • Earnest: Best lender for borrowers with debt-to-income ratios of up to 60%.

  • FreedomPlus: Best lender with a co-signer option.

  • LendingPoint: Best lender with few use restrictions.

  • Payoff: Best lender for credit card debt consolidation.

  • Rocket Loans: Best lender for loans as little as $2,000.

  • Upstart: Best lender for borrowers with FICO scores as low as 620.

Best lender charging only late fees.

Discover offers personal loans for debt consolidation, home improvement and major purchases. Loan terms from three to seven years are available.

  • Minimum FICO score: 660
  • Maximum debt-to-income ratio: N/A
  • Co-signer option: No
  • Preapproval or rate quotes available: Rate check available
  • Loan amounts: $2,500 to $35,000
  • Loan terms: 36 months to 84 months
  • Loan use restrictions: Only debt consolidation, home repairs/improvements, unexpected expenses or major purchases.
  • Discounts: N/A
  • Origination fee: None

Best Features

  • Discover has no fees other than a late fee.

  • Customizable loan terms from 36 to 84 months.

  • Borrowers get free access to their FICO credit score.

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Best lender for borrowers with debt-to-income ratios of up to 60%.

Founded in 2014, Earnest is another fast-growing lender in Silicon Valley. It uses a custom algorithm that identities good loan prospects by considering more than just their credit score.

Earnest clients can decide how much they want to pay each month and then Earnest gives them an interest rate to match. By letting customers decide what they’re comfortable paying, this could also cut down on defaults and late payments.

Best Features

  • Loans available up to $75,000.

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Best lender with a co-signer option.

FreedomPlus offers personal loans with fast approval and fund delivery. Personal loans with FreedomPlus are primarily offered for debt consolidation. If you need help qualifying for your loan, you can use a co-signer with this lender.

  • Minimum FICO credit score: 620
  • Maximum debt-to-income ratio: Maximum is 45% in some cases but 40% in most cases or 30%. Average is 22%.
  • Co-signer option: Yes
  • Preapproval or rate quotes: Yes
  • Loan amounts: $7,500 to $40,000
  • Loan terms: 2 to 5 years
  • Discounts: Co-borrower discount for adding another applicant to your loan request, direct pay discount for letting FreedomPlus use the loan to pay your creditors directly, retirement asset discount if you have over $40,000 in retirement funds like a 401(k) or IRA
  • Origination fee: 0% to 5%

Best Features

  • Borrowers with fair credit may qualify for a loan.

  • Loans of up to $40,000 are available.

  • Same-day approval is available, with loans funded in as little as 48 hours.

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Best lender with few use restrictions.

LendingPoint is an online lending company that caters to those with poor or fair credit who are focused on rebuilding their credit. Loans can be used for any legal personal expense or purchase.

  • Minimum FICO credit score: 585
  • Maximum debt-to-income ratio: N/A
  • Co-signer option: No
  • Preapproval or rate quotes: We sometimes send out pre-approved mailers
  • Loan amounts: $2,000 to $25,000
  • Loan terms: N/A
  • Discounts: N/A
  • Origination fee: 0% to 6%

Best Features

  • Loan funds are available as soon as one day after approval.

  • Borrowers with fair credit may qualify.

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Best lender for credit card debt consolidation.

Payoff offers personal loans designed to consolidate credit card and other high-interest debt. The lender operates nationwide and provides loans of up to $35,000.

  • Minimum FICO score: 640
  • Maximum debt-to-income ratio: 50%
  • Co-signer option: No
  • Preapproval or rate quotes available: Yes
  • Loan amounts: $5,000 to $35,000
  • Loan terms: 2 to 5 years
  • Loan use restrictions: N/A
  • Discounts: N/A
  • Origination fee: Between 0-5%

Best Features

  • Borrowers do not face prepayment or late fees.

  • Borrowers can get preapproved with no hard credit check.

See full profile

Best lender for loans as little as $2,000.

RocketLoans offers personal loans to qualified borrowers in all 50 states. These loans are designed for people with fair to excellent credit who need to borrow up to $45,000 for debt consolidation, home improvements, medical expenses and business or other expenses.

  • Minimum FICO score: 640
  • Max DTI: 32%
  • Co-signer option: N/A
  • Preapproval or rate quotes available: Yes
  • Loan amounts: $2,000 to $45,000
  • Loan terms: 36 months to 60 months
  • Loan use restrictions: Eligibility for a loan is not guaranteed. Please refer to our Disclosures and Licenses page for state-required disclosures, licenses, and lending restrictions.
  • Discounts: Discounts to Quicken Loans mortgage holders.
  • Origination fee: Yes

Best Features

  • Same-day loan funding is available for up to $25,000.

  • No prepayment penalties apply.

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Best lender for borrowers with FICO scores as low as 620.

Upstart uses automation to originate credit, funding more than $3.2 billion to 250,000 borrowers. Loans as small as $1,000 are available with this lender.

  • Minimum FICO score: 620
  • Maximum debt-to-income ratio: Not disclosed
  • Co-signer option: No
  • Preapproval or rate quotes available: Yes
  • Loan amounts: $1,000 to $50,000
  • Loan terms: 3 to 5 years
  • Loan use restrictions: Loan funds may not be used for any prohibited uses noted in Upstart’s Acceptable Use Policy.
  • Discounts: N/A
  • Origination fee: 0% to 8%

Best Features

  • Upstart may accept applicants with fair credit or even those with no credit history, using artificial intelligence to quantify risk.

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Methodology: The best bad credit home improvement lenders are selected based on consumer ratings, minimum FICO credit scores and product availability.

What Credit Score Do You Need for a Home Improvement Loan?

Whenever you borrow money, the lender evaluates your finances to determine the likelihood that you’ll pay back the loan. Your credit score, a numerical representation of your borrowing risk, is a major factor in lending decisions.

Lenders typically require a FICO credit score of at least 620 to qualify for home loans, including home equity loans, but some loan programs can help you borrow with a lower score. A FICO score of 620 falls in the fair range, and a good score is 670 or better.

Before the coronavirus outbreak, “It was possible to get a loan or mortgage with a credit score as low as 500. (Now) most, if not all, lenders have temporarily raised their credit score minimums up into the 600s,” says Eric Jeanette, owner of mortgage loan marketplaces Dream Home Financing and FHA Lenders. “Today, finding any mortgage with bad credit has become very difficult.”

That goes for home improvement loans as well. In fact, three common home improvement loans may not be options if your credit score is too low, says Randall Yates, founder and CEO of The Lenders Network, a loan comparison site for borrowers with credit issues. That includes home equity loans; home equity lines of credit, or HELOCs; and cash-out refinances.

The credit requirements for home equity loans and HELOCs are similar to or even stricter than mortgages. That’s because one of these loans functions as a second mortgage on a property, and borrowers have a higher risk of default.

A cash-out refinance is also risky because you replace your traditional mortgage with a new loan for more than what you currently owe on your home, Yates says.

In general, bad credit home improvement loans are few and far between, including no-credit-check home improvement loans. “All home improvement loans require a credit check and a home appraisal,” Yates says.

If you have bad credit and need a home improvement loan, you might need to look to other financing sources, such as personal loans or government-backed loans.

What Is the Best Type of Loan for Home Improvements

If your credit disqualifies you from getting a home equity loan or cash-out refinance, you still have options.

Which loan is the right fit for you depends on your needs and preferences, but the options below could be good bets if your credit is less than perfect.

HUD 203(k) renovation loan: One of the best programs for financing home improvements is the U.S. Department of Housing and Urban Development 203(k) loan, according to Jeanette. It allows you not only to purchase or refinance a home with as little as 3.5% down but also to borrow the money you need to renovate your home.

Because these loans are backed by HUD’s Federal Housing Administration, they are much less risky for lenders, so credit requirements may be looser. The FHA requires a minimum credit score of 500, but each lender may have its own score requirement. You must also have no foreclosures in the last three years.

“Although there are strict guidelines on what repairs the loan can cover, it is very comprehensive, and it should be something all first-time homebuyers consider,” Jeanette says. “This loan can help you to get into a more expensive neighborhood by finding the one home that nobody else wants due to its condition.”

Title I loan: Another government-backed home improvement loan option is a Title I loan, which is insured by HUD. These loans can be used to finance improvements and repairs for a home, including a manufactured home, that has been occupied for at least 90 days.

Title I loans have no credit score requirements, and you can qualify for one of these loans, even if you haven’t built up equity.

If you borrow less than $7,500, the loan is unsecured; larger loan amounts must be secured with a mortgage or deed of trust on the property. No property inspection is involved.

Energy Efficient Mortgage program: The FHA’s Energy Efficient Mortgage program helps consumers with FHA mortgages finance improvements to make their homes more energy-efficient. For example, you could take out an EEM loan to install solar panels or upgrade insulation.

Similar to 203(k) and Title I loans, EEM loans are provided by independent lenders but are federally insured. This means that they may be easier to qualify for than traditional home improvement loans.

The FHA may allow you to get an EEM loan with a down payment of 3.5% and a credit score of 500, but requirements may differ among lenders.

Personal loan: “If you don’t have enough equity, or if your credit is not good enough to qualify for a home improvement loan, you can look into a personal loan,” Yates says.

Personal loans can be used for many reasons, including financing home improvements and repairs. An unsecured personal loan is ideal because you don’t have to pledge collateral and risk losing your home or other assets.

But if you have poor credit, you may have to get a secured loan, using your home or car as collateral to reduce the lender’s risk.

Generally, you can borrow between $1,000 and $100,000 with a personal loan. And because the repayment period is usually just two to five years, you can avoid racking up interest charges.

The problem is that with poor credit, personal loans can carry interest rates of 30% or more. Even so, a personal loan may be your best bet for financing, as long as you have repairs or improvements that don’t require a large budget.

Home improvement loan from a credit union: If you’re having trouble qualifying for a bad credit home improvement loan from a major bank, you might have more luck with a credit union. Because they are nonprofits, credit unions may offer lower interest rates and more flexible credit requirements to borrowers than major financial institutions.

You’ll have to become a member of a credit union to take advantage of its benefits. Membership may be limited to a community, an employer or a church, for example.

Some credit unions also allow you to join by opening a small savings account.

Other government-backed programs: Many government-backed home improvement loans are available to borrowers. Often, these loan programs have low or no credit score requirements.

Two examples are the U.S. Department of Agriculture’s Single Family Housing Direct Home Loans program and the U.S. Department of Veterans Affairs’ Specially Adapted Housing grants.

Low-income rural homeowners can use the USDA’s direct home loans to repair, renovate or relocate homes. The borrower must be unable to get a loan from other sources and have a “reasonable” credit history, according to the loan officer.

Specially Adapted Housing grants are for veterans and service members with certain disabilities. The grants don’t have to be repaid, which means you don’t need a credit check to qualify. They fund home improvements that allow for more comfortable and independent living.

Should You Get a Home Improvement Loan With Bad Credit?

Make sure your credit score is as high as possible before applying. That means you might want to work on repairing your credit, especially if your project isn’t urgent.

Yates suggests taking time to pay down debt, especially credit cards, to give your score a boost.

If you must borrow money for a home improvement project now, compare loan offers and interest rates from three to four lenders to ensure that you’re getting the best deal. Getting a few different quotes can help you negotiate loan terms, Yates says.

Of course, borrowers with good credit qualify for the best loan terms and lowest interest rates. “In some cases, such as a mortgage loan, good credit can save you tens of thousands of dollars over the course of the loan,” Yates says.

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