Background and when homeowners use them

Personal loans have grown in popularity as a way to pay for everything from emergency roof work to mid-sized remodels. In my 15 years advising clients, I’ve seen them chosen for speed and simplicity: online lenders and credit unions can approve and fund loans faster than many home‑equity products, and there’s no lien placed on the house.

How personal loans work for repairs

  • You apply with a lender; approval depends on credit, income, and debt-to-income ratio. (Expect faster timelines from online lenders.)
  • If approved, you receive a lump sum and repay it in fixed monthly installments over a term (commonly 2–7 years).
  • Rates are typically higher than mortgage rates because loans are unsecured; however, strong credit can secure competitive rates.

Real-world example

A client needed a $12,000 roof repair and didn’t want to extend their mortgage. By shopping lenders, they secured a 6% fixed-rate personal loan for five years. Monthly payments were predictable, and they avoided the closing costs and lien that come with a home-equity loan.

Pros and cons — concise comparison

Pros:

  • Fast access to funds and simpler application than refinancing or HELOCs.
  • No collateral or home lien required.
  • Fixed monthly payments make budgeting easier.

Cons:

  • Higher interest rates than mortgage-backed options.
  • Loan amounts may be limited compared with home-equity solutions.
  • Interest on unsecured personal loans is generally not tax-deductible (see Tax considerations).

Tax considerations (what the IRS says)

Interest on a typical unsecured personal loan used for home repairs is not deductible on your federal tax return. Under current IRS rules, mortgage interest is deductible only when the loan is secured by your home and used to buy, build, or substantially improve that home (see IRS Publication 936) (https://www.irs.gov/publications/p936). An unsecured personal loan—even if used to renovate—usually does not meet those requirements.

If you want tax-deductible interest, consider a home‑secured option (home equity loan, HELOC, or cash‑out refinance) and document that the proceeds were used to substantially improve the home. Tax rules are complex and changed after the 2017 tax law (TCJA), so consult a tax professional for your situation.

Who typically qualifies

  • Best candidates: borrowers with good credit (680+), stable income, and a debt-to-income ratio that keeps monthly payments affordable.
  • Credit scores under ~600 may face high rates or limited options.
  • Self-employed or irregular-income borrowers may need extra documentation.

Alternatives to evaluate

Professional tips before borrowing

  1. Shop rates and fees across at least three lenders; compare APR, not just interest rate. Use the CFPB checklist for comparing loan offers (https://www.consumerfinance.gov).
  2. Match loan term to project budget—shorter terms reduce interest paid but raise monthly cost.
  3. Avoid borrowing more than the repair cost. Keep a buffer for unexpected overruns.
  4. Document how you use the funds if you later decide that deductibility or home-securing matters.

Common mistakes to avoid

  • Assuming interest is deductible: without a secured home lien, it usually isn’t (IRS Publication 936).
  • Focusing only on headline rate: fees and prepayment penalties change the true cost.
  • Borrowing too long: extending a loan to lower payments can multiply interest costs.

Short FAQs

  • Are personal loan interest payments tax-deductible?
    Generally no for unsecured loans used for home repairs; secured home loans used to substantially improve the home may be deductible—talk to a tax pro (IRS Publication 936).

  • How fast can I get funded?
    Many online lenders fund within a few business days; credit unions and banks may take longer.

  • When is a personal loan a better choice?
    For small-to-midsize repairs when you want no lien on the home, quick funding, and predictable monthly payments.

Sources and further reading

Professional disclaimer

This article is educational and not individualized tax or investment advice. In my practice I recommend confirming tax treatment and the best product for your situation with a CPA or CFP before borrowing.