Perhaps you’re thinking about installing a pool but are a little intimidated by the price? If so, you should know that you won’t have to cover all of the costs up-front. There are a number of financing options that you can pursue which will allow you to pay for your pool in small installments over time.
Interested in learning more about these financing options? Then read on. Here is how to finance a pool.
Here’s How to Finance a Pool
There are quite a few ways to finance a pool, each of which has its benefits and its downsides. The most common methods of pool financing are as follows.
1. Home Equity Loan
One of the most popular methods of financing a pool is to take out a home equity loan. This is a loan which leverages your equity in your home as collateral. As such, it necessitates that you’ve paid off a portion off your mortgage.
Most home equity loans allow you to borrow up to 90% of your total equity. So, if you have equity of $80,000 in your home, you could borrow up to $72,000.
A home equity loan is given as a lump sum of money. So, whatever the interest rate is when you take the loan out, it will remain for the duration of the loan. This can be a blessing or a curse, depending on how interest rates change over the years.
At the present time, the average interest rate for a home equity loan is around 5.76%.
2. Home Equity Line of Credit
A home equity line of credit is similar to a home equity loan in that it too leverages your equity in your home as collateral. Where it differs is in the way that it allows you to use it.
Whereas a home equity loan comes as one lump sum of money, a home equity line of credit works more like a credit card. This is to say that it allows you to loan out money as needed and only charges you interest on the money that you’ve withdrawn.
The risk with home equity lines of credit is that they have variable interest rates. So, while your interest rate might start at 5.25%, it could increase up to 5.75% or 6% or an even greater figure before you’ve paid your debts.
Another option is to draw money from your 401K retirement fund. This allows you to acquire a loan up to the amount which is in your account. It then uses the money in your account as collateral.
Interest rates on 401K loans typically range between 5% and 8%, fairly respectable figures when compared to personal loans and credit cards. However, there is a massive negative associated with 401K loans: any amount which is loaned out is considered taxable income. So, while you’ll only be paying 5% to 8% interest on the loan, you’ll also be paying thousands of dollars worth of taxes on it as well.
Another downside to 401K loans is that they must typically be repaid within 5 years. Failure to pay such loans within this time frame will result in an early withdrawal fee of 10%.
In short, unless you plan on having substantial amounts of disposable income in the near future, a 401K loan is a financially risky way to finance a pool.
4. Personal Loan
If you don’t feel like putting up collateral in order to secure a loan, you could apply for a personal loan. Personal loans are given based on credit score, necessitating nothing in the way of collateral.
However, depending on your credit score, this can be a costly way to do things. If your score is anything less than great, you’re going to be paying interest of at least 10%. As you can see, this is substantially higher than the interest rates associated with our previously-discussed financing options.
If you’re thinking about going the personal loan route, you should first inquire about interest rates. If you can get a decent rate (~3.5% to 8%), there’s no reason not to go for it.
5. Pool Company Payment Plan
Depending on the company that you hire to install your pool, you might be able to take advantage of a pool company payment plan. Many companies will allow you to pay your pool off over time at a reasonably low interest rate, provided that you have good credit or a decent amount of collateral to use as leverage.
In some cases, interest rates can be as low at 4.75%. This would be lower than the rates included with both home equity loans and home equity lines of credit.
And the best thing about utilizing a pool company payment plan? You can cut out a good deal of the groundwork. There will be no need to shop around for financing options.
6. Credit Card
Your last option is to charge your pool expenses to one or more credit cards. In the vast majority of cases, however, this is not a wise decision.
Credit cards carry very high interest rates, usually falling somewhere between 15% and 26% APR. Therefore, anything financed on a credit card is going to rack up substantial amounts of interest.
However, there is one type of credit card which could be beneficial: a 0% intro APR credit card. These credit cards charge 0% interest for the first year or so of their use. So, if you can pay off their full balances within that year or so, you won’t be charged any interest at all.
Be warned, however, if you fail to pay off your cards before their intro period end, you could have seismic amounts of interest levied against you. This could, in short, bury you financially.
So, again, in most cases, it’s a good idea to stay away from credit cards when financing a pool. There is much greater risk involved than there is reward.
In Need of Pool Installation Services in Katy, Texas?
Now that you know how to finance a pool, you might be interested in installing a pool on your property. In need of pool installation services in Katy, Texas? If so, we here at Sahara Construction & Custom Pools are the people to see.
We offer financing on all of our pools and can help you to pay for our services regardless of your budget. Sporting a team of highly skilled and experienced installation specialists, we’re well-equipped to give you the pool of your dreams.
Contact us now for a free consultation!