Many Americans have been pinching their pennies amid layoffs and furloughs as a result of the COVID-19 pandemic. However, the state of the economy hasn’t prevented them from seeking out loans for home improvement tasks.
Year over year, requests for home improvement personal loans increased by 7.8 percent from the first week of June 2019 to the same week in June 2020. That increase in personal loans is particularly noteworthy since qualification requirements have become more stringent during the pandemic, and these loans have come with higher offered annual percentage rates (APRs) across all credit bands compared to before the pandemic.
During the last week in May 2020, LendingTree surveyed over 1,000 consumers who had previously applied for a home improvement-related personal loan using the company’s marketplace about how they used the loan.
Loan applicants for home improvement loans cited a variety of reasons for needing a loan. One-quarter of applicants said they had to address emergency home repairs and 27 percent wanted the loan for a remodel. Only 3 percent requested a loan for either new appliances or furniture (not repair-related), and the large majority at 45 percent cited other reasons.
Those individuals who requested a loan for a remodel or other home improvement project largely sought to make improvements to their kitchen (35 percent) or bathroom (26 percent). However, a significant number also wanted to make living room improvements (19 percent) and work on outdoor landscaping (17 percent).
Out of those loan applicants who needed a loan for an emergency repair, 34 percent of respondents had to fix their porch, walls, windows or flooring. A close second to these repairs were those needed for the roof, at 33 percent of respondents. After that, the next most urgent repairs were to appliances (20 percent) and electrical systems (20 percent).
LendingTree’s data showed that reasons for home improvements were clearly divided by one’s income, with individuals earning lower incomes requesting loans for emergency repairs and individuals earning higher incomes seeking loans out for remodels and other purposes.
Two-thirds of survey respondents ended up supplementing their personal loan with an additional source of financing. Most used cash (25 percent), followed by funds from their savings (19 percent), funds borrowed from friends or family (13 percent) and funds from a credit card (9 percent).
In terms of incentives, most loan applicants said their home improvements “just needed to be done” (39 percent). However, reasons were largely split, with 32 percent of respondents stating they wanted to enjoy their home more and 28 percent saying they wanted to increase the value of their home for resale in the future.