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How to Finance a Kitchen Remodel

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If your kitchen operates like it's stuck in the 1950s, a personal loan can help you bring it firmly into the 21st century. Below, we'll cover the cost of remodeling a kitchen, how the best personal loans on the market work, and alternative ways to fund your renovations.

How much a kitchen remodel costs

Imagine whipping up a meal with the help of custom cabinets and high-end appliances. You've got great taste, but they come at a cost: The average luxury remodel will set you back $70,000 or more. A major remodel can be accomplished for $30,000 to $60,000; a minor remodel will likely fall into the $10,000 to $25,000 range.

Getting a kitchen remodel loan

A personal loan is a fast, easy way to take out a home improvement loan. Lenders offer loans as small as $1,000 and as large as $50,000 (or more). Many lenders offer plenty of time to repay the loan. What's more, you can apply for some of the best renovation loans from the comfort of your home.

Compare the best personal loans

Get the best rates and terms to fit your needs. Here are a few loans we'd like to highlight, including our award winners.

Lender APR Range Loan Amount Min. Credit Score Next Steps
Fixed: 8.99%-29.99% APR (with all discounts)
$5,000 - $100,000
680
7.99% - 24.99%
$2,500 - $40,000
660
7.80% - 35.99%
$1,000 - $50,000
300

How a personal loan for a kitchen remodel works

Taking out a personal loan to cover the cost of a kitchen remodel can be a great way to create the kitchen of your dreams, but finding the right loan requires a bit of homework. Before moving forward, contact at least three lenders to learn more about what they offer.

It's important to factor in how much loan fees might set you back. Besides interest, some lenders charge:

While shopping for the remodeling loan that works best for you, make it a point to learn everything you can about any fees a lender may charge and factor them into your loan decision.

Most personal loans work similarly. You apply for a loan, get prequalified, and learn more about the interest rate you're being offered and the total cost of the loan. Only then do you decide if you'd like to move forward.

Personal loans are typically paid out in a single lump sum payment, and you begin making monthly installments within weeks.

Pros and cons of personal loans

Personal loans may be helpful, but they're not perfect. Here are a few pros and cons of taking out a personal loan to remodel your kitchen.

Pros

  • You receive the funds required to bring your kitchen up to date.
  • The return on investment (ROI) for a kitchen remodel ranges from 50% to 96%, depending on the size of the remodel.
  • A kitchen remodel can increase your enjoyment of the property.

Cons

  • Taking out a personal loan to remodel your kitchen means assuming responsibility for a new debt you may or may not feel ready for.
  • Depending on your credit score, you may pay more interest on a loan than you're comfortable paying.

To determine if financing a kitchen remodel is the best course of action for you, you'll have to carefully weigh the pros and cons to decide if you'll get enough benefit from the remodel to outweigh any negatives.

Getting a low-interest kitchen remodel loan

Personal loans are available from banks, credit unions, and online lenders. The application process is fairly straightforward (and spelled out in more detail below). One thing to keep in mind is that the lowest interest rates are typically reserved for those with good to excellent credit scores. If your score is not quite as high as you would like, you may want to consider taking time to boost it before applying for a loan.

Waiting to apply for a remodel loan may not be a bad thing. Not only does it give you time to improve your credit, but it also gives you more time to determine precisely what you'd like done in your kitchen.

If your credit is already high enough to score a low interest rate, take time to shop lenders carefully. You may be surprised by how much their annual percentage rates (APRs) and loan fees vary.

How to apply for a kitchen remodeling loan

1. Gather the documents you'll need

Among the documents a lender may ask you to supply are:

  • Proof of identity
  • Proof of address
  • Employment information
  • Proof of income
  • Bank statements
  • Tax returns

2. Fill out a loan application

The initial loan application covers the basics, including who you are, where you live, how you earn your income, and sometimes, what you plan to do with the funds.

3. Wait for word from the lender

Lenders often check to see if you "prequalify" for a loan based on the basic information you've provided. When a lender deems you "prequalified," it believes you'll do fine going through the more in-depth qualification process.

4. Make a decision

Once a lender informs you that you're prequalified, it also tells you how much you can borrow and your total APR. If you decide it's the right loan for you, you give the lender permission to proceed with the qualification and underwriting processes.

5. Provide documents promptly

Your lender may contact you and ask for additional information. For example, a lender may want to know more about your income if you're self-employed. The more promptly you provide the lender with the information, the faster your loan will be processed.

6. Await loan proceeds

The time it takes to fund the loan varies by lender. Funding your loan can take a lender anywhere from days to weeks. If funding time is vital to you, ask a lender how long it typically takes before applying.

Alternatives to a personal loan

The good news is this: There's more than one way to land a low-interest loan. Here are some of the options available to you.

0% promotional rate

If you're planning a minor remodel and can pay back the money quickly, you might want to pay for your kitchen remodel with credit cards. A credit card with a 0% promotional rate is a great way to borrow money without paying interest -- as long as you can pay off the card before the higher interest rate kicks in (you'll generally have a little over a year to pay off the card). If you go this route, plan to make more than just the minimum monthly payment for the card to take full advantage of the 0% rate.

Cash-out refinance

If you have enough equity in your house, a cash-out refinance is another way to pay for kitchen remodeling. What's more, because your home is used as collateral, lenders tend to offer a more competitive interest rate than they would on a non-secured loan.

A cash-out refinance works like this. Say you currently owe $200,000 on your mortgage, and you set a $40,000 budget for your remodeling project. You could refinance to a $240,000 mortgage (the amount you owe plus the money for your home improvements). Then, you'd get that $40,000 as cash to pay for your kitchen remodel.

HELOC

A home equity line of credit (HELOC) also allows you to use the equity in your loan. And like cash-out refinance, lenders feel safer lending to you because your home acts as collateral. As a homeowner, you can apply to borrow a little at a time from your mortgage lender, up to the amount the lender approves.

Once you repay a portion of the loan, you can borrow it again -- similar to a credit card. This is also known as a second mortgage.

You are the banker

If you have the patience for it, acting as your own banker can save you a great deal of money. Let's imagine you're not doing an entire gut of the kitchen, but want to refinish the cabinets, install new lighting, and purchase new appliances. Your total budget is $20,000. You estimate you can afford to spend $500 monthly on the job. Here's how it would work:

  • You make a list of all the projects you would like to complete, and next to each project, include an estimated price.
  • You put $500 in a savings account each month, earmarked for your kitchen remodel.
  • When you have enough saved to complete one project, you focus on it. Let's say you've found someone who will paint your kitchen cabinets for $2,000. After four months of saving, you have enough money to tackle that job.
  • You continue to put $500 a month away, saving for the next item on your list. For example, you may save for three months to purchase a new dishwasher and two more months to replace the current lighting fixtures.

While it's likely to take longer to complete your kitchen renovation when using your own money, the savings can be dramatic. Here's a comparison:

If You… And Take This Long to Pay It Off Your Monthly Payment Will Be And You'll Pay This Much in Interest
Borrow $20K from a lender at 7% interest 60 months $396 $3,761
Borrow $20K from a lender at 10% interest 60 months $425 $5,496
Use money you've put aside for the project N/A $0 $0
Data source: Author's calculations.

Final thoughts

The advantage of a personal loan covering renovation costs is the extra equity you may be building into your home. Still, it's a huge decision to make. Before signing on the dotted line, be sure the lender you're working with is one you trust and that you're landing the best possible deal for your situation.

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FAQs

  • The average price to remodel a kitchen ranges from about $10,000 to $70,000-plus, but you may spend less or more.

  • To finance a kitchen remodel, you can take out a personal loan, open a credit card with a 0% intro APR promotional rate, take cash out while refinancing your home, or borrow funds through a home equity loan or HELOC.