Kitchen remodeling is a common renovation project for most homeowners. It not only spruces up your kitchen but also helps attract a high property value if you’re looking to sell your home. Typically, a kitchen remodel can be an expensive undertaking depending on how fancy you want to go. As a result, the remodeling may demand a huge sum of money.
In some cases, the cost may be so high that you may resort to borrowing money, for example, through unsecured personal loans to cover the remodeling expenses. Maybe you need a $30,000 kitchen remodel for your mobile home, or a complete remodeling of your home kitchen. This article will compare different kitchen remodeling loans and financing options and provide pro financing tips for your remodeling needs.
What Is a Kitchen Remodel Loan?
A kitchen remodeling loan is a loan borrowed to renovate a kitchen. This loan can be either an unsecured personal loan, credit card, cash-out refi, or home equity finance. The right choice for a kitchen remodel loan depends on your creditworthiness, the project’s total cost, the goal of the renovation, and the available equity.
For unsecured personal loans, you don’t need to present any collaterals for approval. As a result, the risk of the lender confiscating your assets is low. However, these loans come with a relatively high-interest rate, and you need a good credit score to qualify for them.
Other loans such as home equity loans require collateral, and their interest rate is relatively low compared to that of unsecured personal loans.
There are many lenders of kitchen remodel loans in the market today, each offering loans with different terms and conditions. Here, we’ll compare 5 top personal lenders for unsecured personal loans suitable for kitchen remodeling by analyzing their annual percentage rates (APRs), loan limits, and other factors.
So, let’s get started.
SoFi
The SoFi kitchen remodel loan is one of the best unsecured personal loans available in the U.S. market.
Qualifications:
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- Must be a U.S. adult citizen, either a permanent resident or visa holder
- Must be employed with a sufficient income. If not, you should be anticipating employment within the next 90 days
- A credit score of at least 680
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Loan Terms:
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- Loan amount ranges from $5,000 to $100,000
- Annual percentage rate (APR) of 4.99% to 19.63%
- Offers .25% discount for setting up an autopay
- Loan term of 2-7 years
- No origination fee
- No late fee
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Wells Fargo Personal Loan
Wells Fargo personal loan is another popular unsecured home improvement loan you can use for your kitchen remodeling.
Qualifications:
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- Must have a Social Security Number
- Contact details such as permanent address, telephone number, and email address
- Employment and income details, including mortgage or rent amounts
- No minimum credit score is required for approval
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Loan terms:
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- Loan amount ranges from $3,000 to $100,000
- Annual interest rates range from 5.74% to 19.99%
- Offers 0.25% relationship discount to existing customers for setting up an autopay
- Loan term of 1-7 years
- No origination fee
- Late fee of $39
- This lender doesn’t offer an option to prequalify on the website
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Marcus by Goldman Sachs
These personal loans are popular for their customer-friendly rates and flexible repayment terms.
Qualifications:
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- Must be a U.S. adult citizen
- Must present valid U.S. bank details, Individual Tax I.D., or Social Security number
- Proof of income such as a current pay stub or bank statement
- Minimum credit score of 660
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Loan terms:
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- Loan amount ranges from $3,500 to $40,000
- Annual percentage rate ranges from 6.99% to 19.99%
- Offers 0.25% for setting up autopay
- Loan term of 3-6 years
- No origination fee
- No late fee
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LightStream
LightStream is one of the personal lenders that issue loans explicitly designed for kitchen remodels.
Qualifications
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- A credit score of over 660
- A good credit payment history with little or no delinquencies
- Enough income to cater to existing debts and the new Lightstream loan
- Evidence of ability to save money such as retirement savings or investments
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Loan terms
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- Loan amount ranges from $5,000 to $100,000
- Annual percentage rate of 3.99%-16.99%
- 0.50% discount for enrolling in autopay
- Flexible loan term of between 2-12 years
- No origination fee
- No late fee
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LendingClub
LendingClub is another lender for personal loans suitable for kitchen remodeling.
Qualifications:
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- A credit score of at least 600
- Good credit history of at least 3 years
- Debt-to-income (DTI) below 40% for a single application and 35% for joint or combined applications
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Loan terms:
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- Loan amount ranges from $1,000 to $40,000
- The annual interest rate of 7.04% to 35.89%
- Loan term of 3-5 years
- Origination fee 1%-6%
- Late fee: Greater of 5% of payment after 15-day grace period or $15
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Pros and Cons of Unsecured Kitchen Remodel Loans
Pros
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- No collateral required for loan approval
- Unlike credit cards, they have relatively low interest rates, especially if you have a good credit score
- The loan approval and funding takes a relatively short period, typically between 1-7 business days
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Cons
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- Rates may be higher than those of home equity lines of credit (HELOC) or home equity loans
- Unsecured kitchen remodel loans have no tax benefits, unlike home equity loans and (HELOC)
- It’s sometimes difficult to qualify for an unsecured kitchen remodel loan if you have a low credit score
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Other Kitchen Remodel Financing Options
Unsecured personal loans aren’t the only way to finance a kitchen remodel. There are other financing options which include:
1) Credit Cards
Credit cards are suitable for low-cost updates that you can repay within 12-18 months. Most credit cards come with a promotional period. This is a period, usually between 6-21 months, in which you don’t incur any interest on your loan. So, you can save on interest charges by paying off your small loan with a 0% interest credit card.
However, be sure to check the credit card’s terms to avoid paying hefty sums if your payments go beyond the promotional period. You can use credit cards for a kitchen remodel under 10k.
2) Home Equity Loan
This financing option is suitable when you already know the total remodeling cost and want the loan amount as a lump sum. The loan is cheaper than personal loans but may take longer to fund, typically 30-45 business days. Home equity closing costs and interest rates are low, and the loans have long repayment periods.
However, this loan uses your home’s equity as collateral. Therefore, you risk losing your home if you default on the loan. This loan can be suitable for a $30,000 kitchen remodel, which you expect to increase the value of your home at the end of the project.
3) Home Equity Line of Credit (HELOC)
A HELOC comes in handy when you don’t know the exact amount of the remodeling cost. This is a type of revolving loan. So, instead of receiving the amount as a lump sum, you receive it in installments until the remodel is over. And like a credit card, a HELOC allows you to draw and pay only what you need at that particular moment.
However, keep in mind that this loan is secured by your home’s equity. You risk losing your home if you default on the loan repayment.
4) Federal Programs
You can also remodel your kitchen using Federal programs issued by the Federal Housing Administration (FHA). These programs include Title 1 Property Improvement Loans and the Energy Efficient Mortgage Program.
The former is available when the renovation cost is anticipated to exceed $7,500, and it is secured with a mortgage or a trust deed. The latter is used for renovations that help lower your utility bills while improving your home’s energy efficiency.
Kitchen Remodel Financing Tips
Here are some pro tips on how to finance a kitchen remodel:
1) Prioritize Your Updates
Always prioritize your renovation budget depending on the importance of the updates. For example, don’t rush to buy fancy appliances before creating a space for them in the kitchen.
2) Budget More Than the Anticipated Amount
It’s advisable to always set aside at least 17% to 20% of the market resale value of your home every time you budget for a kitchen remodel. If possible, consult a contractor for a fair estimate.
Keep in mind that a kitchen remodel can result in unexpected costs from faulty wiring, plumbing, or added features. Thus, you should save 10% of your budget to cover these hidden costs.
3) Account For the Value of Your Home
Accounting for your home’s value is important, especially if you intend to sell your home. Your goal here is to minimize the expenditures and maximize the return. You can seek help from an experienced real estate agent to gauge whether your planned renovations will increase the value of your property.
4) Study the Loan Terms
Before taking a loan to fund your kitchen remodel, take your time to study the loan terms. Analyze the APRs, loan limits, and repayment terms. Also, check whether there are any other charges such as late fees and origination fees. Compare different loan options and settle on the one that perfectly matches your needs.
Wrapping It Up
Whether you’re doing a kitchen remodel for a mobile home or a permanent home, it’s always important to have good financing plans.
Depending on your financial needs, credit score, and the available home equity, you can either get an unsecured personal loan, home equity loan, HELOC, or a Federal loan to cater to your kitchen remodel financial needs. Do your research to find the best way to finance a kitchen remodel.
Proper financial planning can help you handle your kitchen remodel needs without any hitch.
Featured Image: Twenty20
