What Is a Home Improvement Loan and How Do You Get One?

By Lisa A. Koosis

May 04, 2026

Whether you’re facing a leaky roof or planning your dream kitchen renovation, home improvement projects can be costly. A home improvement loan provides financing for repairs or renovations so you can spread out the cost with fixed monthly payments, but don't sign on the dotted line until you know what these types of loans actually do.

This May Also Interest You: Should You Remodel or Move? Here’s How to Decide

What Is a Home Improvement Loan?

A home improvement loan is a type of financing that homeowners can use to fund home repairs, upgrades or renovations. These remodeling loans can range from a few thousand dollars to more than $100,000 (CAD 138,537), and many lenders don’t place restrictions on how you can use the funds. Terms and conditions vary widely by lender and loan type, and some home remodel loans are secured, meaning your house serves as collateral for the loan.

What Are the Different Types of Home Improvement Loans and How Do They Work?

Although many banks define home improvement loans as unsecured personal loans used for structural renovation and repair, there are several other types of financing intended for home improvement projects, all with different benefits, risks, lending requirements and repayment terms. These financing options include:

Home equity loans: These loans are second mortgages that rely on your home’s value. They provide a lump sum payment that you can use for repairs, upgrades or renovations. Your house serves as collateral for the borrowed amount.
Home equity lines of credit (HELOC): A HELOC provides homeowners with a line of credit based on their home’s equity. You can opt for a lump-sum payment or withdraw funds in several smaller payments as needed.
Cash-out refinancing: Cash-out financing replaces your mortgage with a higher-value loan and pays you the difference in value in cash when the loan closes. It can be used for home projects or other expenses, and the loan often has a lower interest rate than other types of home improvement loans.

How to Get a Home Remodel Loan

The process of obtaining a home improvement loan is typically simple and straightforward. To get financing, you'll need to:

Calculate the amount of financing needed. For some projects, like replacing a roof, figuring out your funding needs is fairly straightforward. Monetary requirements for other projects, such as home additions, may not be as easy to calculate, and you should always plan for contingencies.
Identify the right type of loan for your needs. For example, if your credit score is low or you have a limited credit history, a secured loan may be easier to qualify for because it uses your house as collateral. If you want fewer restrictions, a personal home improvement loan may be a better option. Your bank's loan officer can help you navigate the different types of loans.
Shop around to compare rates and terms. Banks, credit unions and online lenders all typically offer home improvement loans, and rates can vary widely by lender. Some lenders also offer higher top-end loan amounts than others.
Gather essential information. Before you visit your financial institution, gather information about your income, assets and current debts. Your bank will also request supporting documentation, so make sure to have it ready.
Start the application process. Many financial institutions offer online loan applications, or you can visit a local branch to get started.
Receive the funds. Some lenders offer same-day approval and payout, often via direct deposit so you can get started on your project.

How Do I Qualify for a Home Improvement Loan?

Loan requirements differ depending on the loan type and lender, but you’ll typically need the following to qualify:

Valid photo ID such as a driver’s license or passport
Proof of permanent residence, such as bank statements or utility bills addressed to you
Proof of income, such as pay stubs, tax returns or financial statements
Good credit (usually a score of 670 or higher), although some lenders provide financing at higher interest rates to individuals with lower credit scores
Low debt-to-income ratio, which measures how much money you have after paying your monthly bills

More Related Articles:

What Is a Home Equity Loan?

A home equity loan lets you borrow against your home's equity. In other words, if the value of your house is worth more than what you currently owe on it, you can tap into that money without refinancing your current mortgage.

These loans, which typically provide a lump-sum payout, can be used for home improvements or repairs, to fund major purchases or for financial emergencies. Most home equity loans have a fixed interest rate, so you'll always know exactly how much you need to pay each month.

Pros and Cons of Home Improvement Loans

Home improvement loans can be a quick way to access the funds you need for a household repair or upgrade. Depending on the terms of the loan, they may also be a good way to fund a major household purchase or handle a financial emergency. Moreover, many types of home improvement loans have fixed rates, so you’ll know exactly how much you’ll have to pay back monthly.

However, these loans have drawbacks, too. First and foremost, when taking out a loan, you're committing to paying it back. If your income changes unexpectedly, you could have difficulties making payments. More importantly, if you take out a secured loan, your house is on the line if you default on the loan.

Other Financing Options For Home Renovation and Repair

Home improvement loans aren’t the only way to finance home repairs or renovations. If you don't want to take out a loan, here are a few other financing options:

Credit cards: If you don't need much money, you can put the expenses on a credit card. To avoid high interest rates, look for a card that offers a 0% APR introductory rate for the first 12 to 18 months.
Direct financing through a general contractor: Some contractors work with third-party lenders to offer direct financing. This type of financing typically offers paperless applications and quick approvals so the contractor can get to work right away.
Grants: Federal, state and local authorities may offer grants for projects that address safety, accessibility or energy-efficiency needs, particularly in households that include seniors, low-income applicants or individuals with disabilities. For example, the U.S. Department of Veterans Affairs offers Home Improvements/Structural Alterations (HISA) grants to veterans who need to make structural alterations to improve accessibility or accommodate home medical equipment.
401(k) loans: Some 401(k) plans let you take out low-interest loans against your balance and repay them through paycheck deductions. You'll typically need to be fully vested in your plan before this option is available.
Reverse mortgage: Homeowners aged 62 and above, can borrow against the equity in their house without worrying about monthly payments. These loans don't come due until the homeowner sells the house or passes away.

Follow us