How to finance a bathroom remodel with a home improvement loan

A home improvement loan is a type of personal loan you can use for a repair or remodeling project. They’re generally unsecured and have a fixed interest rate. (Shutterstock)

Updating your bathroom can make your home feel a lot more luxurious, but the project comes with a significant price tag. Even a mid-range bathroom remodel costs more than $27,000 on average, and an upscale project can run you $82,000 or more, according to Remodeling magazine’s Cost vs. Value report. 

But upgrading your bathroom can improve your home’s function and style and boost your property value, to boot. You have ways to finance the project without risking your home or depleting your equity, including a home improvement loan. 

Credible makes it easy to see your prequalified personal loan rates from various lenders, all in one place.

• What is a home improvement loan?
• Financing a bathroom remodel with a home improvement loan
• How much does it cost to remodel with a home improvement loan?
• How to get a low-interest bathroom remodel loan
• Pros and cons of a home improvement loan for bathroom remodeling

What is a home improvement loan?

A home improvement loan is a type of personal loan that you use to repair, remodel, or renovate your home. Like all personal loans, home improvement loans are generally borrowed in a lump sum and paid back over a period of two to seven years at a fixed interest rate. 

Personal loans are typically unsecured, meaning you don’t have to pledge your property as collateral. The amount you can borrow and the interest rate you’ll pay are determined by your credit score, debt-to-income ratio, and other factors.

Financing a bathroom remodel with a home improvement loan

Home improvement loans are widely available, with many banks, credit unions, and online lenders offering personal loans for home improvement projects. 

When you’re ready to apply, you can select the amount you’d like to borrow and choose from a range of loan terms. You won’t need a home appraisal or pay closing costs, and the best personal loans don’t have any fees.

You’ll also generally pay a lower interest rate on a personal loan than you would on a credit card, saving you money.

Visit Credible to compare personal loan rates from various lenders, without affecting your credit.

How much does it cost to remodel with a home improvement loan?

Remodeling your bathroom can be a time- and money-intensive project, though it can add significantly to your home’s value. In general, the low-end price for a full remodel is about $15,000 for a small secondary bathroom, while a large primary bathroom remodel can start at $50,000, according to HomeAdvisor. 

The main costs you’ll face are the materials and labor that go into fixing up your bathroom, though you’ll also run into borrowing costs if you’re financing the project. 

Materials and labor

All together, materials costs for a bathroom remodel can range from $1,000 to $9,000, according to HomeAdvisor — and sometimes even more if you choose luxury fixtures and products. 

Labor costs can range from 40% to 65% of the total cost of the project, according to HomeAdvisor. However, labor costs can vary significantly based on the materials you choose, how large your bathroom is, and how much you want to change. For example, large tiles are easier and quicker to install than small tiles, and therefore involve less labor costs. 

A bathroom remodeling project generally takes at least three to four weeks to complete, though home improvement projects can often take longer than expected.

Borrowing costs

When you finance your bathroom remodel with a home improvement loan, you’ll also have borrowing costs that will depend on factors like: 

• Interest rates — Your interest rate is a percentage of your loan amount that you pay your lender each year. The higher the interest rate, the more you’ll pay over the life of the loan.
• Lender fees — Many personal loan lenders charge one-time fees in addition to interest. In most cases, lenders will deduct their fee from the amount of money they deposit into your bank account. The best home improvement loans don’t include fees.
• Credit score — Your credit score can affect both the interest rate and fees you’ll pay. Generally, a higher credit score will give you access to lower interest rates.
• Amount borrowed — Both interest rates and fees depend on the total amount you borrow. Larger loans have larger interest payments and larger fees.
• Repayment terms — Longer loan terms generally mean lower monthly payments, but you’ll also pay more in interest over the life of the loan. Shorter loan terms have larger monthly payments, but your total interest costs will be lower.

How to get a low-interest bathroom remodel loan

To save money on your bathroom remodel, you’ll want to get the lowest possible interest rate on your home improvement loan. These tips can help you get the best rates:

• Review your credit report. Lenders rely on your credit history to determine your interest rate, so you’ll want to make sure your credit reports are accurate before you apply.
• Make all your bill payments on time. The best way to improve your credit score is to make all your monthly bill payments on time, every time.
• Pay down other debts. Large amounts of debt can weigh down your credit score. To get a better interest rate, consider spending some time paying down your credit card balances or other loans before taking on a home improvement loan.
• Avoid other loans. If you know you’d like a home improvement loan for your bathroom remodel, avoid taking out any other types of credit for a period of time before doing so.
• Consider a secured personal loan. While most personal loans are unsecured, some lenders may offer a secured loan that can be a good option if you have poor credit. The collateral you use doesn’t have to be your home. You may be able to use your vehicle or financial investments instead.

If you’re ready to apply for a home improvement loan, Credible lets you quickly and easily compare personal loan rates to find one that works for your unique situation.

Pros and cons of a home improvement loan for bathroom remodeling

Before you apply for a home improvement loan, consider the benefits and drawbacks of this financing option:

Pros

• Quick, flexible funding — You can often get home improvement loan funds deposited into your bank account within a day or two.
• Predictable monthly payment — With a fixed interest rate, you’ll know exactly what your monthly payment will be until your loan is paid off.
• No risk of foreclosure — As an unsecured loan, home improvement loans don’t give your lender the ability to foreclose on your home if you fail to make your payments.

Cons

• Higher interest rates than some options — Since they’re unsecured loans, home improvement loans often have higher interest rates than you’d pay on secured loans, like a home equity loan or HELOC.
• Can be hard to qualify for — You may need to have good credit to qualify for a home improvement loan.
• No flexibility in payment — Credit cards allow you to make smaller, minimum payments when your budget is tight. With a home improvement loan, you need to make the same monthly payment no matter what, or risk going into default.

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