Home Renovation Loans for Bad Credit

Home Renovation Loans for Bad Credit

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Whether you’re looking to make minor updates to your kitchen or need a complete bathroom remodeling, home renovation projects can be expensive. Unfortunately, many home improvement loans are reserved for borrowers with exceptional credit. If your credit leaves a lot to be desired, you may think your home renovation dreams are out of reach. Fortunately, there are home renovation loans for bad credit available and some possible alternatives that can allow you to get the renovations your home needs.

Key takeaways

  • Home renovation loans for bad credit do exist.
  • Consider co-signers, government loans, or private lenders.
  • Shop around for interest rates, fees, and terms.
  • Alternatives: credit cards, home equity loans, or improve credit score.
  • Home renovations still possible with bad credit.

How to get a home improvement loan with bad credit

Despite a poor credit history, if your home needs renovations, there are ways to secure the financing required to cover these improvements. While it may require a bit more work on your end, it is still possible.

Get a co-signer

If you struggle to get a home improvement loan on your credit alone, you might consider adding a co-signer to your loan application. This is where another party, such as a friend or family member, signs onto the debt to help you secure the financing you need. Based on their credit, you may be able to secure better terms and a lower interest rate.

Government loans

Government loans, often through the U.S. Department of Housing and Urban Development (HUD), offer programs for homeowners to fund home renovation projects. For example, the FHA Title 1 loan is designed to help those with less than perfect credit secure a loan to cover repairs to their residential property. The FHA Streamlined 203 (K) program allows homeowners to finance up to $35,000 into their mortgage in order to cover home improvements.

Private lenders

Private lenders are another option. Many lenders specialize in home renovation loans for those with poor credit. These lenders are often more willing to provide these loans because they know the loans are being used to increase the home’s value.

How to choose the right home renovation loan

Shopping for a home renovation loan can feel like a challenge when you have less than perfect credit. With not as many options available, you may be tempted to take the first loan you qualify for. However, when looking for these loans, you must take the time to consider the interest rates, terms, and fees before applying for and accepting a loan.

Interest rates

It is important to compare your options, which is especially important for interest rates. Many lenders can provide rates through soft credit inquiry when applying for a loan, which does not affect your credit score as a hard credit inquiry. You may need to apply to various lenders to compare potential interest rates. Ensuring that each lender runs a soft inquiry is essential to ensure that your credit score does not plunge further while comparing rates.


Many loans targeting those with less than perfect credit often come with origination and administration fees. While some of these fees can be added to your monthly payment amount, others may come out of the principal balance at the time of funding. When comparing lenders, it is important that you take these fees into consideration.


As with any loan, the terms are just as important as the interest rate when it comes to your home renovation loan. The longer your loan term is, the more interest you will pay over the life of the loan. When considering your ideal terms, you need to consider the highest monthly payment you can afford and remain manageable to choose the shortest terms possible. Be sure to give yourself a cushion when considering this, as choosing a higher monthly payment that may be a struggle can result in late payments and further damage to your credit score.

Alternatives to home renovation loans if you have bad credit

While a home renovation loan is often your best option, it isn’t your only option. You can consider alternatives, and if your renovations can wait, it may be beneficial for you to focus on other improvements first.

Credit card

Funding your home renovations with a credit card is an alternative to a home renovation loan. If you have a current credit card with the available credit, this may be the best place to start. Applying for a new credit card is another option, but there are some things to consider. Applying for a credit card creates a hard inquiry on your credit, further dropping your credit score. In addition, with bad credit, chances are you will not receive approval for a new card with enough credit to cover your home improvement expenses.

Home equity loan

If you have at least 15% to 20% of the equity in your current home, your best option may be to apply for a home equity loan to fund your home improvements. Because this type of loan is considered a secured loan on your home, the interest rates are often lower, and your approval rates are higher.

Improve your credit score

If your home renovations can wait a little bit, your best option is to take some time to improve your credit score. Doing this will help ensure you qualify for a home renovation loan that offers better rates and terms when you are ready to apply for a loan. Following these steps will help you improve your credit score:

  • Request a copy of your credit report and review, ensuring that all the information is accurate and identifying potential problems that you can address.
  • Address any negative accounts on your credit report.
  • Continue to pay all your bills on time or early.
  • Pay down your current debt to reduce your credit utilization.
  • Use any current credit card responsibility. This means making payments on time and keeping your overall balance low.

Home renovation is still possible with bad credit

While working to improve your overall credit score is your best bet when qualifying for a home renovation loan, there are ways to still qualify for the loan you need. At Hero Home Programs, we work with borrowers to help ensure they find a quality home and the best possible lending options to help them achieve homeownership or the home renovation loan they need.

If you are interested in learning more about how we can help, contact us online today.

Picture of Jacquelyn Sublett
Jacquelyn Sublett

I love teaching and writing on real estate, finance and mortgage topics. I find it fulfilling hearing stories of first time home buyers who we have helped with the home buying process. Writer for the Hero Homebuyer Programs™

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