Best Loans to Build a New Garage (2025 Guide)

If that’s the low end of the price range, you’ll probably need some kind of financing help to pay for it. Luckily, you have plenty of options, whether it’s cash, personal loans, or tapping into your home equity. In this article, we’ll walk you through all of those to help you find the best loan to build your new garage.

Best Loans to Build a New Garage (2025 Guide)

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$1,000-50,000 Loan Amount

8.49-35.99% APR

3–7 years Terms

560 Minimum Credit Score

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Disclaimer

Personal loans made through Upgrade feature Annual Percentage Rates (APRs) of 8.49%-35.99%. All personal loans have a 1.85% to 9.99% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. Loans feature repayment terms of 24 to 84 months. For example, if you receive a $10,000 loan with a 36-month term and a 17.59% APR (which includes a 13.94% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $341.48. Over the life of the loan, your payments would total $12,293.46. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by Upgrade's bank partners. Information on Upgrade's bank partners can be found at https://www.upgrade.com/bank-partners/.

The cost and value of a new garage

A garage addition can bring you a return of 64% to 81% of what you pay for it. That means a $30,000 garage could add $19,200 to $24,000 to the value of your home.

This is true for both attached garages (which are directly connected to the main home) and detached garages (which are separate, free-standing structures).

Maki says that, at least where he works, “detached is always less expensive.” This is because of building codes. “Once you attach it to the house, now you have a different set of codes,” he explains. “All municipalities are going to require a minimum of an architectural-stamped drawing on an attached garage, which increases the price.”

The architectural stamp is an official acknowledgment that “the architect claims responsibility for the work and certain liabilities.” 

“Detached garages, as long as they’re under 600 square feet, typically do not need architectural stamps,” he tells us, but even that will vary depending on where you are in the country.

In fact, Maki says building codes top the list of things that catch homeowners by surprise when they embark on a garage project.

For example, “with today’s codes, anything over 600 square feet requires what’s called ‘frost-protected foundation,’” which is a foundation deep enough to extend below frost depth. It comes into play in areas prone to ground freezing and “heaving” during the winter. Different climates will have different codes, so make sure to conduct research as part of your planning and budgeting.

Financing options for building a garage

Tip

Cash is convenient and quick. But if you can't pay with cash, you have several financing options.

It’s tough to save up enough cash for such an expensive project. However, cash payments make up a surprising amount of Maki’s jobs. “I would say 90% of our bills are cash,” he says.

Cash is convenient and quick. Some contractors offer discounts if you pay with cash. But if you can’t swing that high a payment all at once, you have several options.

Garage contractor financing

Many garage contractors, including Maki’s company, are qualified to offer financing. This is typically done through a bank. 

In order to qualify to offer financing, a contractor has to undertake a KYB (Know Your Business) and demonstrate their credentials to the bank. According to Mike McGinley, VP of Lender Relationships at Acorn Finance, that process means the contractor has to provide pertinent business information like, “you have to do X amount of sales every year, you have to have been in business for four or five years, [and] you can’t have any liens of judgment against your company.” 

As it happens, these are all good things to look for in a contractor, so if a contractor offers financing, you can have confidence that they’ve been vetted by a bank.

Home equity loan options

Your home equity is “the difference between how much your home is worth and how much you owe on your mortgage.” It’s essentially the percentage of your home’s value you actually own.

Specifics vary by lender, but if you own at least 15-20% of your home as equity, you may be able to borrow up to 85% of that amount (as a new mortgage) to pay for a new garage, any number of home improvements, or pretty much anything else.

These loans are secured, meaning you use your house as collateral. This makes your loan less risky to the lender, which can result in lower interest rates. For example, borrowing the same amount might get you an interest rate of 10% to 13% on an unsecured loan, but 7% to 10% on a secured loan. Over the years that you spend paying off the loan, that two or three points can make a big difference in the total cost.

The downside of using your house as collateral is that it raises the possibility that you’ll lose your house if you can’t keep up with your payments.

Here are three common ways to get a new garage using your home equity.

• Home equity loan: This results in a second mortgage that you’ll receive in one lump sum.
• Home equity line of credit: Instead of a lump sum, this gets you access to an amount of cash from which you can borrow as much or as little as you need. This allows flexibility if your expenses change from your initial plan.
• Cash-out refinance: Instead of a second mortgage, this is a brand-new mortgage that pays off your existing mortgage and provides the extra cash you want to make your renovations.

Personal loans

A personal loan is an unsecured loan. You’re not using your house as collateral, so you’re not in danger of losing it if you can’t make the payments. But your interest rate will be higher.

You can apply for a personal loan at your bank or credit union, or through an online loan source like Acorn Finance. A major advantage of Acorn Finance is that you aren’t limited to what a single bank can offer; you can browse a wide range of loans from multiple sources from the comfort of your screen.

You’ll have options for your repayment period. The convenience of a longer payback period and lower monthly payment will generally result in a higher interest rate.

Government loans

A 203(k) loan is a loan insured by the Federal Housing Administration (FHA) intended to cover the purchase of a home and its renovations.

If you are looking to add a garage to a home you already own, this loan would pay off your existing mortgage and replace it with a new one, with the excess funds placed in escrow for use toward your new garage. (Essentially, it would be a cash-out refinance.)

These loans are intended to make utilitarian improvements to a property, and “rehabilitating, improving, or constructing a garage” is among the officially designated uses.

Since the FHA insures these loans, lenders can be more lenient regarding the borrower’s credit score. If your score is 580 or higher, you can apply with a minimum down payment of 3.5%. (A lower score will require a 10% down payment.)

Credit cards

It’s not unusual to find a credit card offering a 0% introductory APR for the first year or two. If you use one to pay for your garage, and if you’re able to pay off the entire debt during that introductory period, it’s essentially an interest-free loan.

But if you don’t pay off your purchase during the 0% APR period, the interest rate can jump to around 28%.

How your credit score affects the “best loan”

Your credit score impacts your access to all of these financing options. The higher your score, the lower the risk a lender sees in you, and the greater chance you’ll be approved for a loan. A higher score will also get you a lower interest rate.

For example, if you have a credit score as low as 550, which FICO considers “very poor,” it is possible to find loans through Acorn Finance, but there will be fewer lenders at that level and they’ll offer less favorable terms.

Josh Shaw, Contactor Account Manager at Acorn Finance, shares some tips for improving your credit score. “The main thing is making your payments on time,” he advises. “Make sure you’re not 30 days late because that’s the point where your score gets hit pretty heavily.”

Lenders are also wary of high balances on your credit cards and late payments on debts. Improving your borrowing habits will improve your score in the long run.

Important

Your credit score impacts your access to all of these financing options.

Turn to Acorn Finance to finance your new garage

Have you got your electric guitar tuned up? Because the next step is building your new garage and rattling the foundation with jams. Visit Acorn Finance to find your perfect personal loan – just enter your financing needs, and within minutes, you’ll be able to choose from a range of offers you’re prequalified for from high-quality lenders. Select the one that works best for you, and within days you’ll have the money to begin work on your new garage.