Should You Finance Home Repairs With a Personal Loan?

An air conditioner repairman uses a clipboard to explain the cost of repairs to the homeowners.

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It may not be a bad idea, but there are other options to consider.

Key points

  • Many people can’t pay for home repairs outright.
  • If you need to finance a large repair, a personal loan could be a good solution, but it’s not your only one. 

Home repairs can pop up when you least expect them. And sometimes, they can be very expensive — so much so that you can’t simply dip into your savings account and pull out the money to cover their cost. For example, if your air conditioning or heating system goes, you could be facing repairs that cost upward of $10,000. And if you end up needing a new roof due to extensive damage, your bill could be similarly high.

When you’re stuck with a home repair you need to pay off over time, you have options. And one you may want to consider is a personal loan. But is that the best choice for financing home repairs?

The upside of using a personal loan

A personal loan lets you borrow money for any purpose, and the higher your credit score, the greater your chances of snagging an affordable borrowing rate. Personal loans also tend to close quickly, so you might easily have your money within a week of getting approved (and sometimes within days). That’s convenient when you’re looking at a home repair that needs to be tackled immediately. 

Plus, when you take out a personal loan, you’re generally locking in a fixed interest rate on the sum you borrow. That makes your payments under that loan nice and predictable, and you won’t have to worry about them rising over time.

Is there a better option?

A personal loan can be a great way to cover a home repair in a pinch. But before you go that route, it’s worth seeing if you can borrow against your home. 

These days, U.S. homeowners have a lot of equity in their homes to tap, since property values are up on a national level. And if you borrow against your home, you might snag a lower interest rate than what you’ll get with a personal loan.

That said, if you’re going to borrow against your home, you’re better off with a home equity loan than a home equity line of credit, or HELOC. That’s because home equity loans, like personal loans, come with fixed interest rates. The interest rate on a HELOC can be variable, and that’s not a good thing right now. With interest rates climbing, if you take out a HELOC today, it could become more expensive to pay off over time.

What’s the better borrowing choice?

If you have equity in your home, it could pay to compare the interest rate you’ll get with a personal loan versus a home equity loan and see which one is more competitive. Also, some people don’t like the idea of borrowing against their homes and would rather take out an unsecured loan like a personal loan. 

If you’re looking at comparable interest rates, then a personal loan isn’t a bad bet. But a home equity loan could mean spending a lot less on interest, especially if your credit score isn’t the best, so make sure to assess your choices carefully before deciding how you’ll finance a home repair.

The Ascent’s best personal loans for 2022

Our team of independent experts pored over the fine print to find the select personal loans that offer competitive rates and low fees. Get started by reviewing The Ascent’s best personal loans for 2022.

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