Pool Financing 101

Swimming pools are one of the most popular addition to homeowners choose to add. They are an amazing addition folks add for fitness, provide non-stop entertainment for kids during the summer, and are also a phenomenal place to kick back and relax with friends and family.

Despite all of the benefits, they can also be one of the most expensive home add-ons. In fact, the average in-ground pool costs between $35,000 and $60,000 to install. Add-ons like additional features, such as a forced current or an add-on spa, led lights or waterfall will cost extra, and that’s not even counting fencing, decking, or other additional things you may want.

Installing a new pool is a major investment, but there are several financing options that can help you afford such a venture.

Different Types of Swimming Pool Loans

Home Equity Loans & Lines of Credit

Home equity products, as you might guess, are secured by the equity in your home. They offer you the opportunity to borrow money at a lower rate than most personal loans or credit cards and come with longer terms for repayment.

A home equity loan works much like other loans. First, you apply and, if approved, you receive the loan proceeds in a lump sum. Payments generally start the next month and you’ll make monthly payments until the loan is paid back in full. Interest rates vary by lender but are usually fairly affordable. As of October 2018, for instance, they were about 5 percent, on average. Home equity loans are great if you know exactly how much you’ll need up front and are confident you won’t go over budget.

With a home equity line of credit, you have a limit you can borrow, but you can borrow and repay up to that amount over and over during the draw period, which is usually five or 10 years. They typically are slightly more expensive in terms of interest than a home equity loan but still far lower than a credit card or personal loan. If you’re worried about going over budget or don’t want to take out more than you need, a HELOC can help by allowing you to only take what you need when you need it.

Personal Loans

A personal loan is an unsecured loan product offered by banks, credit unions, and other lenders. Loan amounts range from a few thousand to hundreds of thousands of dollars, making them a valid option for pools of all sizes. In order to qualify, you typically need to have verifiable income and a good credit history. It’s a big risk for the lender since there is nothing securing the loan, so the eligibility requirements tend to be more strict through the loan process.

Interest rates for a personal loan are often fairly high to offset their risk, but those with excellent credit may be approved for a loan with an interest rate under 10%. Loan terms are also typically shorter than with home equity products and range from around 2 to 7 years.

Dealer Financing

Swimming pool dealers often offer in-house pool financing, but this is generally the most expensive of the three major options. While they often run specials where 12 or 18 months are “same as cash” with a “pay no interest” period, if you aren’t able to pay off the pool during that time, you’ll often be stuck with a high interest rate. To make matters worse, they may even add on the interest that was accruing in the background during the introductory period which can be substantial.

Dealers do, however, often offer financing to those with poor or fair credit scores and can sometimes be slightly more flexible than a bank or other lender.

Benefits of a Swimming Pool Loan

Some of the benefits of swimming pool financing are obvious, such as having a source of recreation on your property. Other benefits, however, include effective use of space in your yard that can add significant value to your home—increasing the price you can get later if you ever sell. In addition, your swimming pool could actually help protect you by increasing the equity in your home. It frees up additional equity in case you have a sudden large home repair or another emergency that needs financing.

Drawbacks of a Swimming Pool Loan

Not everything about getting a swimming pool loan is perfect and risk-free. Pools require daily, weekly, and monthly maintenance, and the bigger or more option-loaded your pool is, the more you’ll pay for upkeep. It’s cheaper if you do the maintenance yourself, but it will still cost you money and time. If you’ve financed your pool, you’ll be making monthly payments on the loan with interest, plus the maintenance costs on the pool, which could be more than you can afford.

Things to Keep in Mind When Financing a Swimming Pool

Before you rush over to your bank to apply for a swimming pool loan, do some comparison shopping with several banks and different products to see if you may be eligible for a lower interest rate. Look at your budget. How much can you afford to spend on pool-related expenses in a given month? How much equity will it add to your home, and is the expense worth it? Are there any other alternative options you might consider before financing?

You may decide that you need to get a smaller pool than you envisioned or even choose to put off financing at all until you can afford the pool you want out-of-pocket. Depending on where you live, such as a northern location with snow on the ground eight months out of the year, you may decide that the limited use doesn’t justify the expense.

Bottom Line

Building a swimming pool is a major investment. Before you leap, have a solid financial plan for how to afford it and make sure you really want it. That way, once it is installed, you can relax poolside knowing that you have a plan for repayment and there is nothing to worry about with your swimming pool loan.