Borrow $20,000 over five years at 15 percent APR and you pay $476 a month and $8,548 in total interest. At 25 percent, the payment climbs to $587 and the interest bill to $15,222. That gap is the figure that matters when you shop for a home improvement loan, and it is why NerdWallet’s latest ranking of lenders spends so much time on who can offer the lower rate.
NerdWallet reviewed nearly 40 online lenders, banks and credit unions. Its advice is that a personal loan can be the best way to pay for a project if you need money soon and would rather not put your home up as collateral. Check your credit score first, since it decides both whether you qualify and what rate you get. Pre-qualifying involves a soft credit pull that does not affect your score.
The five lenders
Upgrade suits borrowers who need more than one way to qualify. It offers co-signed and secured loans, which lenders see as less risky, with amounts from $1,000 to $75,000. That range earned it five out of five stars for flexibility. The catch is an origination fee of 1.85% to 9.99%, deducted from the proceeds. NerdWallet suggests a credit score of at least 600.
SoFi is for big projects and strong credit. Loans run from $5,000 to $100,000, among the highest maximums NerdWallet sees, with same-day funding and joint loans. SoFi told NerdWallet its average borrower scores 720 or higher.
Patelco Credit Union may be the cheapest. It caps APRs at 17.90%, while many reputable lenders top out near 36%, and it charges no origination fee. Loans range from $300 to $100,000. You must join the credit union before funding, and money can take two or three days to arrive, too slow for an urgent repair.
Happen Bank, formerly LendingClub, is the pick for a joint loan when credit is not strong. Its minimum score is 600 and loans run from $1,000 to $75,000. Happen says co-borrowers should have good or excellent credit, a reasonable debt-to-income ratio and verifiable income. The origination fee can reach 8%.
Upstart is aimed at borrowers with poor or limited credit. It has no minimum score or credit history requirement and weighs factors such as education and work experience. It reports payments to all three credit bureaus, so on-time payments could lift a score. The fee can run as high as 12%, when other lenders typically stop at 10%, and it is the only lender on the list with no co-signed or joint option.
Before you apply
Most personal loans are unsecured. Miss payments and your credit suffers, but nothing is seized. The trade-off is cost. APRs run from 6% to 36%, with the lowest rates going only to applicants with good or excellent credit, and the interest is not tax-deductible the way it can be on a home equity loan. Terms are typically two to seven years.
A home equity loan or a HELOC puts your house on the line, which can mean lower rates, but the lender could take the home if you stop paying, and an appraisal can slow funding.
