If so, you will find out exactly how to do so. There are more options now than ever.
Many people have already burned through their savings or have suffered from their home equity dropping during the 4-year housing slump that Americans had to fight through.
Simply put, a lot of potential borrowers don't have the equity in their homes that's needed to qualify for a home equity loan. In fact, nearly 5.5 million homeowners are "underwater", meaning in negative equity or near it. Ever since the housing slump homeowners in need of home improvement loans have run into a big obstacle to funding their home projects. Banks have become a lot more restrictive in requirements for being approved for loans.
Major Problem: Many Banks Won't Give Unsecured Home Loans
Many have found it very difficult to get a home improvement loan without equity, many lenders balk at the thought of offering unsecured home improvement loans. Those that do offer home renovation loans without requiring equity will make you jump through a lot of hoops in order to truly prove that you are very credit-worthy.
It is not uncommon for people with very good credit to be turned down without much of a valid explanation as to the reason of the denial. Many times it seems that the banks are simply afraid to give these types of loans, but many prospective borrowers would have liked to know that before beginning the application process and wasting their time.
Why Unsecured Home Improvement Loans Beat Credit Card Use
Much like credit cards, unsecured home improvement loans don’t require collateral from you. But unlike your average credit card, unsecured home improvement loans offer fixed payments and rates, fixed home improvement loan interest rates make all the difference in the world. They make it easier to fit your payments into a set budget. You also get the benefit of borrowing more money than the average credit card will allow.
The New & Best Unsecured Loans For Home Improvement
There are a couple great options to look to when you need to get a home improvement loan without equity. Some have been around for quite a while and some are relatively new. The majority of the options mentioned in this article have something in common. They take advantage of financial technology and allow you to apply for a loan online and they offer better rates than the traditional banks. If you're a regular reader of The Lending Mag then you know that we view "fintech" as the wave of the future and thus we'll be sure to introduce you to the cutting-edge options for online loans and home renovation/improvement financing.
Another great advantage to the loans providers we will teach you about is that you can get paid electronically as well, so the entire process can take place from your home. The application and the receiving of payment requires nothing more than computer access for you. So let's get into detail about your options for the best unsecured loans available right now.
Best Unsecured Home Improvement Loans Overall: Prosper
Prosper is one of the biggest peer-to-peer lenders in the United States, in fact they were the first ever in the U.S.
With Prosper you can borrow up to $35,000 for home improvement projects. You do not need to back the loans with anything of value, thus making them unsecured home improvement loans that don't require equity. Peer-to-peer lenders like Prosper are causing many people to avoid traditional banks because they offer very reasonable home improvement loans rates in comparison.
APRs start at 5.99% for borrowers at the top of the credit scale, you will have options of 3 or 5 year terms to pay the loan back. One of the aspects about Prosper Marketplace and other peer-to-peer lenders is the extreme transparency. They don't throw a stack of papers at you and hope that you don't catch the devil in the fine print. The major two p2p lending companies, Prosper and Lending Club, have rates and fees that are clearly explained, easy to understand and sitting in plain site.
Speaking of Lending Club, the reason we don't have them on this list is because they tend to be more strict with their borrowing guidelines and requirements. They require a 660 credit score for p2p borrowers while Prosper allows you to have a FICO credit score as low as 640, Prosper also looks at several other factors to see if you can get a better home loan rate besides your credit score. You can borrow up to $35,000 at APRs ranging from 5.99% to 32.99% depending on your credit-worthiness factors and the loan grade that Prosper assigns you.
Prosper has also been known to pay many borrowers within a week, but it is possible for the funds to take up to 2 weeks to be deposited into your bank account.
- They are the first and most established peer-to-peer lending company in the U.S.
- They lend to homeowners in 47 states (Iowa, Maine and North Dakota are the exceptions).
- Borrowers with credit scores of 640+ have a good shot at eligibility for a loan.
- Transparency - No hidden fees or rate hikes.
- Funds are electronically deposited and usually within a week after loan approval.
- No prepayment fees.
- Borrowers pay an origination cost of up to 5% of the total loan.
- Only two repayment terms available (3 and 5 years).
LightStream: 2nd Best Unsecured Loans For Home Improvement
SunTrust Bank has an online loan division known as LightStream that is rather impressive. If you have great credit you will likely be able to get great home improvement loan interest rates with LightStream. You can borrow up to $100,000 through SunTrust's online loan service which is surely enough for even the biggest home improvement projects. Unlike Prosper though, you must apply for at least $5000 which might be more than you need. Also unlike Prosper, LightStream will not charge an origination fee.
LightStream also pays out loan money extremely fast, you can have the loan deposited into your bank account within 24 hours. But if you don't have squeaky clean credit you will have trouble getting a loan with this lender. Not only does your credit score have to be top-notch but they want to know more than that, you'll need to be able to provide proof of "sufficient and stable" assets and income as well as have a proven and solid history of personal savings, among other requirements.
- No origination fees on your loan.
- Very competitive interest rates.
- You can borrow up to $100,000.
- Flexible loan terms from 24 to 84 months.
- Your loan can be paid within 24 hours.
- You cannot borrow less than $5000.
- They have a very high threshold for borrower credit-worthiness.
Avant: Unsecured Home Improvement Financing For Less Than Stellar Credit
If you are dead set against taking out a secured loan but are having problems getting the lower rates from other unsecured home improvement loan providers you still have options to get your project funded. Avant lends up to $35,000 and you can get a loan from them even if your credit score is as low as 600. They don't charge originations fees on loans and they lend to homeowners in all but 4 states (you aren't eligible if you live in Iowa, North Dakota, Maine or West Virginia). The rates aren't as good as Prosper or LightStream, but that is a trade-off you may have to accept if your credit isn't up to par enough to get unsecured home improvement financing from the other lenders. Avant offers APRs of 9.95% to 39.95% for its loans.
Also, beware of the rates depending on which state you live in, the APRs can go as high as a staggering 64% in a select group of states for borrowers at the bottom of the credit scale. Obviously, if they present you with high rates like that keep on looking for a suitable loan, that is unacceptable even for a bad credit home improvement loan. Avant is not yet accredited by the Better Business Bureau because of how new this WebBank is, so if you prefer a more tenured and proven loan provider you will want to look elsewhere.
- They don't charge origination fees.
- Your loans can be paid within 24 hours.
- They offer flexible loan terms from 12 months to 48 months.
- They loan to homeowners in 46 states across the country.
- Services loans to people with lower FICO scores (600+)
- Depending on your state, rates can go up to 64%.
- They're a new bank and not yet accredited by the BBB.
WellsFargo: Best Traditional Bank For Unsecured Home Improvement Loans
The Lending Mag is known not to be fans of traditional brick and mortar banks, but we will give credit where credit is due. WellsFargo is the best of the traditional bank bunch when it comes to offering excellent home improvement loan rates and relatively good customer service (in comparison to the other brick and mortar banks). They have great credibility and are an established brand. WellsFargo offers loans as low as $3000 and as high as $100,000 to borrowers with good credit. The loan terms range from 1 to 5 years and they don't charge origination fees or prepayment penalties like so many of the other traditional bank institutions.
WellsFargo offers loan rates of 6.25% to 19.75%. The problem with dealing with WellsFargo for a loan is that they aren't nearly as convenient as the online lenders and peer-to-peer lending options. Unlike a p2p lender like Prosper, you'll need to physically go to the branch and apply for a loan. In this age of fintech and the ability to apply for a loan from your electronic device at so many other lenders, this can be a huge drawback.
- Well-known and established banking institution.
- Low advertised rates for those with good credit.
- Offers a wide range of loan repayment terms from 12 to 60 months.
- Does not charge prepayment fees on loans.
- You have to physically go into the branch to apply.
- Their customer service doesn't compare to many online lenders.
What To Look For When Seeking The Best Unsecured Loans
No matter which unsecured home improvement loan you choose, you should always keep a few things in mind in order to be sure you're getting the best deal available. This involves more than simply checking home improvement loan interest rates. Always be sure to....
#1 - Compare Apples To Apples:
Don't just jump at the first unsecured loan offered to you. Every lender is different, has different requirements and different pros and cons. The way they treat you and serve your loan will vary. Just because a lending company is ready to lend to you doesn't mean you should accept it. Not until you shop around and do your homework. A great resource we use to compare loans is the PersonalLoans.com website, you can compare loans against other loans and evaluate which unsecured home improvement loan will suit you and your family's financial needs best.
#2 - Study The Fees Thoroughly
Don't be fooled into thinking that the only thing you will be paying is the home improvement loan interest rates and get surprised by additional fees. But, if you do find that there are additional fees, don't automatically assume that the loan is bad, it depends on the situation. Total up the entire cost of the loan and then make your evaluation. One lender may not charge a fee because they are charging you more interest in the long run. So it's important to crunch the numbers and not have any surprises come up to bite you later.
Origination fees are the most common type of fees you will see attached to unsecured home loans. For example Prosper charges a 5% origination fee. You also need to be aware of any prepayment fees. These are a huge catch-22 type of fee to avoid if you have any plans on trying to pay the loan off before its term expires. Some lenders will want to make you pay a fee for paying your loan off early because they don't get the full amount of interest from your loan that they would have earned if you had made payments throughout the full term of the loan.
Lastly, find out everything there is to know about the fees for late payments ($15 or 5% of your outstanding balance is typical). Other fees may include charges for payments made by check or unsuccessful payments.
#3: Choose The Right Loan Terms
The terms of your loan make a major difference because they ultimately affect how much money you pay over the life of your home improvement loan. Some people prefer to have longer loan terms because the monthly payments are lower, but that also means you'll pay more money in the long run.
Some borrowers may prefer to make higher payments within shorter terms in order to pay out less money overall.
For a more concrete example, let’s say you take out a $15,000 unsecured personal loan at 10% interest. According to the Bankrate home improvement loans calculator, you would pay out $17,424 over a three-year term, but $19,122 over a five-year term. If you can afford the higher monthly payment ($484 a month for three years instead of $318 a month for five years), the shorter term means nearly $1,700 in savings left in your bank account.
Wrap Up: Best Unsecured Home Improvement Loan Check List
You’ll of course want a low interest rate from your unsecured home improvement loan, but you’ll also want the flexibility of selecting a loan term that works for you and your family, a lender with no unnecessary fees, and a lender that treats you with respect and values your business. Here are the factors that should always be taken into account when selecting an unsecured home improvement loan:
- Low Interest Rates: Be sure that the loan provider’s advertised interest rates are comparable to or lower than the advertised rates of all competing lenders.
- Low or no fees: Some lenders charge origination fees and others don't charge anything other than the interest rates of the loan. Depending on who you choose to service your unsecured home improvement loan, there will be different amounts charged for prepayment and late payment fees. If your lender of choice charges fees, they should never be significantly higher than competing lenders.
- Higher loan limits: The better lenders won’t cap their home improvement loans at excessively low sums, credible lenders will allow you to borrow a reasonable amount to do what you need to do for your home renovation project.
- Informative and Transparent website: The best lenders are transparent about fees, interest rates, loan terms, and other important information. Their website should clearly direct you to where you can find this information, and you shouldn’t need to give your own personal info in order to access it.
- Serves most of the country: While most major banks have national reach (or close to it), online banks and peer-to-peer lenders may only be able to service loans in a limited number of states. Check if you are in an eligible state if you want a loan through a peer-to-peer lender, they are often the best loan option, unfortunately some states don't yet have access to them.
- Reputation: You may want to consider the lender’s reviews, reputation, and status with the Better Business Bureau. But keep in mind that BBB accreditation is a good thing but not the only thing, there are always newer companies that won't yet be accredited.
You now know how to get a home improvement loan without equity. Also, keep in mind that some unsecured home improvement loans are hmda reportable.
If You Are Interested In Getting Loan Approval In Minutes:
If you would like to apply for a peer-to-peer loan from one of the top 2 U.S. peer-to-peer lending companies you can do that here. Peer-to-peer lending is an exciting new option for borrowers and investors, to receive a loan quote from Lending Club or Prosper does not affect your credit. Choose from the options below.
- Check rates for a personal loan up to $35,000 from Prosper
- Compare rates for a personal loan up to $35,000 from Lending Club
- Check rates for a business loan up to $300,000 from Lending Club
- Invest In P2P Loans Through Prosper
Your financial opportunities have never been greater with the growth of peer-to-peer lenders in the U.S., see how you can take advantage of it today.