Pools are the perfect escape from the heat of the summer months. However, they don’t come cheap. A fully installed backyard pool can cost upwards of $50,000. That’s not the type of change everyone has sitting in the bank waiting for a sunny day. But there are options.
Pool Financing Methods
The four common methods of financing a pool in Florida are:
- Personal loans
- HELOC (home equity loans of credit)
- Pool financing programs
- Credit cards
Your choice of pool financing method will depend heavily on what’s your credit score, credit history, debt-to-income ratio, amount of equity you own (for HELOC), repayment terms and so on.
Let’s discuss which option will be most viable for you.
1. Personal Loans
An unsecured personal loan can be a suitable option for financing your pool if you don’t want to use your home equity.
Many financial institutions, including banks, credit unions, and lenders like Lightstream, Lyon Financials and SoFi, offer personal loans specifically marketed as “pool loans.” The interest rate on these loans can go as high as 36% depending on factors like your credit score (ideally 700+ for low APR), current income, other debts, and the repayment tenor you choose.
Once approved, you’ll receive a lump sum (up to $100,000) to cover the costs of your pool installation or renovation.
Pros of using a Personal Loan
- Fast approval and funding: The application process is quicker compared to options like HELOCs or home equity loans, with many lenders offering approval and funding within a few days or even the same day.
- No collateral required: Personal loans are unsecured. This means that in the unfortunate event of you being unable to make timely payments, the lender cannot foreclose on your home.
- Fixed interest rates: Most personal loans come with fixed interest rates, making it easier to budget with predictable monthly payments.
Cons of using a Personal Loan
- Higher interest rates: Personal loans generally come with higher interest rates than home equity financing options, making them more expensive over the loan’s duration.
- Credit score dependency: A low interest rate on a personal loan relies heavily on your credit score. If your score is below 700, expect higher rates, which can raise the overall cost of your pool.
- Tougher approval for poor credit: With a lower credit score, qualifying for a personal loan can be challenging, and if you do get approved, the interest rates will likely be very unsuitable.
- Short repayment terms: Being unsecured in nature, these loans don’t allow much flexibility when it comes to repayment. So you would have to make large monthly payments.
2. Home Equity Loans or Lines of Credit (HELOC)
These loans typically offer lower interest rates compared to personal loans since they are secured by your property. To qualify, you are required to own at least 15 – 20% equity in your home.
A Home Equity Line of Credit (HELOC) functions similarly to a credit card. It gives you access to a revolving line of credit that you can use to draw funds as needed to cover the cost of your pool and repay over 20 years, with some additional fees. However, the interest rate is variable.
Pros of using a HELOC
- Pay only for what you use: Your monthly payments are based only on the amount you withdraw, and you’re charged interest solely on what you borrow.
- Extended draw period: The draw period typically lasts around 10 years, allowing you continued access to the credit line even after your pool is paid off.
- Lower interest rates: HELOC interest rates are generally lower than credit cards or personal loans since the loan is secured by your home.
- Potential tax benefits: Interest may be tax-deductible if the funds are used for home improvements, according to the IRS.
- Lower closing costs: Closing costs are much lower than a cash-out refinance, often amounting to only a few hundred dollars.
Cons of using a HELOC
- Variable interest rates: HELOCs typically have variable interest rates, meaning your payments can fluctuate over time.
- Increased mortgage balance: A HELOC creates a second mortgage, which raises your overall mortgage balance and can complicate future refinancing options.
- Risk of foreclosure: Since a HELOC is a secured loan, defaulting on payments could result in losing both your home and pool.
3. Home Equity Loan Pool Financing
Similar to a HELOC, a home equity loan is a form of second mortgage that allows you to borrow against the value of your home at reasonable interest rates (under 9%). You can use the funds for various purposes, including financing a swimming pool or other home improvement projects.
However, unlike a HELOC, which provides a revolving line of credit, a home equity loan gives you the full amount upfront, which you can repay over up to 30 years with a fixed interest rate.
Pros of using a Home Equity Loan
- Fixed interest rate and payments: Home equity loans offer a fixed interest rate and predictable monthly payments, providing stability compared to HELOCs.
- Lower interest rates: They often come with lower interest rates than HELOCs or personal loans.
- Potential tax deduction: Interest may be tax-deductible if used for home improvements.
- Quick approval process: Approval is typically faster and more affordable than a full cash-out refinance.
Cons of using a Home Equity Loan
- Closing costs: While lower than a full refinance, home equity loans still involve closing costs.
- Risk of foreclosure: Since your home is used as collateral, failure to make payments could result in losing your home.
4. Pool Financing through Manufacturers and Dealers
When financing a pool, working directly with pool manufacturers or authorized dealers can be a convenient and appealing option. In most cases, they manage everything themselves – from the application process to pool purchasing and financing.
They also often offer incentives like deferred payments, lower introductory interest rates, or special discounts as part of their financing packages.
However, only settle for a deal with them after you’ve done thorough research and are sure they’re offering the best rate with reasonable repayment terms.
Pros of Manufacturer or Dealer Financing
- No collateral required: Financing through the pool manufacturer or dealer doesn’t require using your home as collateral, providing more security in case of payment issues.
- Streamlined process: The process is more straightforward, combining the pool purchase and financing, saving time and reducing complexity.
- Tailored financing options: Manufacturers offer financing specifically designed for pool buyers, often with competitive rates, flexible terms, and promotional offers.
- Incentives: Some dealers provide perks like deferred payments or lower initial interest rates, which can be financially attractive in the short term.
Cons of Manufacturer or Dealer Financing
- Potentially higher costs: While promotional rates may be attractive initially, they can lead to higher costs if rates increase after the introductory period or fees are not fully disclosed.
- Less flexibility: Once you commit to a manufacturer’s financing, it may be difficult to adjust terms if your financial situation changes or if better options become available elsewhere.
- Interest is not tax-deductible: Unlike home equity loans or HELOCs, the interest on manufacturer or dealer financing cannot be deducted from your taxes.
5. Contractor Financing for Pool Installations
In addition to manufacturers, many pool contractors offer their own financing options through partnerships with lending institutions. This can be an efficient way to manage the costs since the contractor handles everything for you – from the application to loan processing and pool installation within the agreed-upon budget.
For example, Swimming Pools of Florida and Tampa Bay Pools offer tailored financing plans with institutions like Lyon Financial to help homeowners fund their pool projects.
However, it’s important to review the terms and conditions carefully and compare rates to avoid potential conflicts of interest or higher-than-expected costs.
Pros of Contractor Financing:
- Quick Approval: Contractor financing often provides fast funding, allowing projects to start sooner. Approval can be granted shortly after agreeing on a budget.
- Simplified Process: Pool financing and purchasing are handled in one place by the contractor, providing a seamless experience to the homeowners.
- Partnerships with Lenders: Contractors collaborate with financial institutions to offer suitable financing options tailored to pool installations.
Cons of Contractor Financing:
- Limited Flexibility: Similar to manufacturer financing, you may have fewer opportunities to shop around for better loan terms.
- Potential Conflicts of Interest: Contractors may prioritize lenders they work with, which might not always align with the homeowner’s best interests.
- High Interest Rates: As the contractors typically offer unsecured loans, interest rates tend to be higher, which increases the overall cost of financing.
6. Credit Cards
This approach involves using credit cards, particularly those offering 0% APR introductory periods, to cover the costs of building or installing a pool.
Many credit card issuers offer a 0% APR (Annual Percentage Rate) as an incentive for new cardholders, typically lasting 12 to 18 months. During this period, you won’t incur any interest on your purchases, which could make financing your pool more manageable in the short term.
While this method can be beneficial, it’s crucial to remember that once the introductory period ends, the card’s regular interest rate will take effect, which can range between 16% to more than 30% (for bad credit scores).
Pros of Using Credit Cards
- 0% APR Introductory Offers: During the promotional period, you won’t be charged interest, allowing you to spread out payments without accruing additional costs.
- Payment Flexibility: Credit cards offer the flexibility to adjust your payments as needed as long as you meet the minimum monthly payment requirements.
- Rewards Programs: Depending on your credit card, you might earn rewards such as cashback, points, or miles for your pool-related expenses.
Cons of Using Credit Cards
- High Interest Rates After Intro Period: Once the 0% APR promotional offer ends, any remaining balance will be subject to the card’s regular interest rate, which can be significantly higher.
- Impact on Credit Score: Large purchases like a pool can increase your credit utilization ratio, possibly lowering your credit score.
- Potential for Long-Term Debt: If you don’t have a solid repayment plan, the high interest rates and large balances could lead to long-term financial strain.
Takeaways
In summary, financing a pool in Florida can be done using personal loans, HELOCs, home equity loans, manufacturer or contractor financing, and credit cards. No matter what type of loan you choose, your credit score plays a crucial role, especially in personal loans.
On the other hand, home equity options typically offer lower rates, with less reliance on credit score but involve using your home as collateral, which increases risk.
To make an informed decision, it’s vital to compare interest rates and terms across all financing methods while considering your financial situation.
Here’s a quick idea of what interest rates you can expect when financing your pool using different loans:
Unsecured Personal Loans
- 10.73% – 12.50% (with a 720+ credit score)
- 13.50% – 15.50% (with a 690 – 720 credit score)
- 17.80% – 19.90% (with a 630 – 689 credit score)
- 28.50% – 32.00% (with a 300 – 629 credit score)
Both Home Equity Loans and HELOC loans can be approved at less than 9% interest rate (with a 620+ credit score).
Credit Cards – The interest rates can go as high as 30%+ once the introductory offer ends, depending on multiple factors.