What makes a great home improvement loan?
What criteria do we suggest using in narrowing your list—and how do you know which lenders you can trust?
We’ve developed an exhaustive screening process to help us identify not just the best loan terms, but the best lenders to work with when securing a home improvement loan.
Some of our criteria include:
- Interest rates. Are they competitive?
- Repayment terms and options. How flexible are they?
- Discounts. How much can you save?
- Penalties and fees. The fewer, the better.
- Customer service. Is it easy to do business with them?
- Lender history and reputation. How well established are they?
How to choose a home improvement loan
So how do you recognize a great deal on a home improvement loan when you see one? Here are a few factors.
Interest
The lower your interest rate, the better. The amount you qualify for will vary widely depending on your credit score and financial situation, the amount of the loan, the length of time you take to pay it back, and other factors.
Fixed vs. variable rates
Most lenders offer a fixed interest rate, where the amount stays the same over the course of your loan.
However, some also offer the option of a variable rate that changes based on the market. Typically, the introductory rate on a variable loan is lower than that of a fixed loan—but it may go up or down over time.
Terms for repayment
The “term” usually refers to how long it takes to repay the loan. The shorter your term, the higher your interest on average—but the less time it takes to pay the loan back.
Most home improvement loans take about 3-5 years to repay. Some may have longer and shorter terms.
Penalties and fees
Some lenders charge various fees including:
- Origination fees
- Prepayment fees
- Fees for bounced checks or late payments
- Fees for paying by check
These may be for amounts that seem small, but they can add up over time. Sometimes they can render a low-interest-rate loan a lot more expensive than it appears—so it pays to check the fine print.
Available discounts
On the other hand, some lenders offer discounts for things including:
- Signing up for automatic payments
- Opening a checking account with that lender
- Making 12 payments on time
How to tell if you qualify for a home improvement loan
Lenders will decide what interest rates you qualify for based on a variety of factors. These typically include your:
- Credit score
- Income
- Current level of debt, and
- Other aspects of your financial life.
Home improvement loan interest rates and fees
How much will your new loan cost, beyond the original amount of the loan? Here’s a closer look at some of those factors.
Interest rate
The better your credit score, the lower the interest rate you’ll qualify for.
Every lender’s criteria will be different. The best way to comparison shop is to fill out applications for multiple lenders. The lender will do a “soft pull” to check your credit and make an initial offer.
Unlike a “hard pull”—which is a more thorough look the lender does when finalizing the loan—the soft pull won’t ding your credit. You can get it done multiple times without it affecting your credit, making it possible to shop around.
Penalties and fees
Some lenders charge flat fees and penalties, either on a one-time basis or as a percentage of your loan. Some of the more common include:
Origination fees. These are usually a small percentage of your loan (although some may be as large as 8% — yikes!). They’re charged when you take out the loan.
Application fees. A few lenders charge fees to review your application. Be aware—sometimes the fee is nonrefundable even if you don’t take out a loan with that lender.
Check processing fees. Some lenders want to encourage you to set up automatic payments — to a point where they may charge you a flat amount to process a check.
Prepayment fees: If you pay your loan off before the deadline, some lenders may hit you with a fee.
Late fees: Most lenders charge a fee—either a flat amount or a percentage of your payment—for sending a payment in late.
Fees for bounced payments: If you don’t have enough in your bank account to cover your payment, you may be hit with a fee.
In-depth reviews of the top lenders in Philadelphia
Need more information to make your decision? Smart move.
We’ve assembled a detailed comparison of our favorite Philadelphia home improvement lenders.
Ever heard of a little place called Citizens Bank Park? Go Phils! Citizens Bank is ingrained in the Philadelphia area. On top of that, it was named one of the “best banks in America” by Money magazine, making Citizens a consistently solid choice for a home improvement loan.
Even though it’s one of the nation’s oldest and largest financial institutions, Citizens has shown a commitment to being at the cutting edge of technology, offering both convenience and stability to their customers. Plus, Citizens has an excellent record of civic responsibility and engagement. Their staff provides more than 85,000 hours of volunteer time each year to various causes, including teaching financial literacy in the communities they serve. So it’s a bank you can feel good about doing business with.
Key features of a Citizens Bank home improvement loan:
- Borrow from $5,000 to $50,000.
- Lenders' rates fluctuate all the time based on market conditions, but Citizens has a rock-solid history of offering some of the lowest interest rates available at any given time.
- On top of already low interest rates, you can take advantage of multiple discount opportunities. If you sign up for automatic payments, Citizens Bank will reduce your interest rate by 0.25%. And, if you’re already a Citizens Bank customer, you can qualify for an additional 0.25% loyalty discount..
- Get a fast, easy rate quote that won’t ding your credit. You can get a rate estimate without completing a full loan application. The process takes just two minutes, and it has no impact on your credit score.
- No need to worry about fees. Citizens Bank doesn’t charge application fees, annual fees, or even late fees.
The folks behind SoFi, which stands for “social finance,” feel your pain when it comes to debt. The company was created by a group of Stanford business students who found themselves with a mountain of debt after graduation. Today, they offer a variety of lending products through their online platform.
Key benefits of a SoFi home improvement loan include:
- Borrow up to $100,000 — a higher maximum loan amount than offered by most other lenders.
- Complete your application online. SoFi is all about making the lending process fast and easy.
- If you’re a highly qualified borrower and you take advantage of available discounts, you could score an interest rate as allow as 5.99%, as of September 2019.
- If you lose your job through no fault of your own, SoFi may allow you to deter payments temporarily until you get back on your feet. (However, it’s important to note that interest will continue to accrue during the non-payment period.)
Marcus is the retail banking arm of finance giant Goldman Sachs. Founded in 2016, Marcus currently focuses on two things: high-interest savings accounts and home improvement loans. By tightly focusing on these two areas, the company is able to offer highly customized financial products.
Key benefits of a Marcus home improvement loan include:
- Award-winning customer service. The company was named #1 in customer satisfaction by J.D. Power.
- After 12 consecutive on-time payments, you have the option to defer one monthly payment with no additional interest or fees.
- Personalized loan options based on your desired payment term and monthly payment. Their handy online calculator can help you determine how much you need to borrow, and help you design a payment plan that will set you up for success.
Lighstream is the digital banking arm of SunTrust Bank. It was founded with the vision to simplify the lending process for borrowers with good to excellent credit. If you have a high credit score and a solid income history, Lightstream is definitely worth taking a look at.
Key benefits of a Lightstream home improvement loan:
- If you have excellent credit, you could qualify for loans up to $100,000. (However, it’s important to note that your online application will involve a hard credit pull, so do a little homework on qualifications before you apply.)
- As part of its Rate Beat program, Lightstream says it will beat any competitor’s interest rate by 0.10% if you can show that you’ve been approved for a loan of identical terms.
- It’s possible to apply, be approved, and receive your money all on the same day.
Laurel Road has small-town roots, but it has grown into a national online lending powerhouse. In fact, it was one of the first lenders to completely digitize the loan process using proprietary technology. Expect a seamless online experience if you decide to take a out a loan from Laurel Road.
Key benefits of a Laurel Road home improvement loan:
- • Borrow up to $45,000.
- • Apply online and get the money disbursed right into your bank account.
- • Get 0.25% knocked off your interest rate when you sign up for automatic payments.
Best Egg is an online-only lending platform that was conceptualized by veterans from the banking industry who wanted to bring a tech-startup vibe to online lending. The goal: make banking easy for the way that people live today.
Key benefits of a Best Egg home improvement loan:
- APRs start as low as 5.99% for highly qualified borrowers.
- Borrow from $2,000-$35,000.
- There are no prepayment penalties.
- About half of approved applicants get their money within 24 hours of approval.
- You can get a no-obligation pre-approval online without a hard pull on your credit.
FAQs about home improvement loans in Philadelphia
Q: How do I apply?
Most lenders make this easy, with a seamless online application process on their website. Some documentation you may be asked for includes:
- Tax records
- Information on your employment and income
- Bank account statements
- Legal identification
Q: How long does it take to get approved?
Some lenders may be able to give you an initial offer in minutes once you fill out their online application.
However, the entire process of securing the loan may take about a week—or longer, depending on whether you have all your documentation ready.
Q: Is a fixed or variable interest rate better?
It depends on what you need and how long you expect to take to pay off the loan.
Fixed rates stay the same over the life of your loan. That’s good news if you want to keep your monthly payment the same and predictable. This is often better for long-term loans.
Variable rates fluctuate based on the market, but your introductory rate starts off lower, typically, than it does with a fixed rate loan. However, payments may increase at any time. Often variable rates work better for shorter-term loans.
Q: How much can I borrow for a home improvement project?
Again, it depends: this time on the lender as well as your own finances.
Most lenders have minimum and maximum limits, and they’re all different. A typical range may be from approximately $5,000 to $50,000, but you may be eligible to borrow more if you have a strong credit score and income.
Q: How soon will I get my check after the loan is approved?
This also depends on the lender. Some (like Citizens Bank) will pay quickly; as soon as two business days after you’re approved. Other lenders may take as few as 24 hours or as long as a month.
