How To Finance A Pool Loan

Posted on March 11, 2021 in Loans

On a hot summer day, there is almost nothing better than going for a dip in the cool waters of a swimming pool. There isn’t much that beats the heat quite like that. The hard part is where to find a pool to go for a swim. Sure there may be nearby public pools and water parks, but the prices and crowds end up making it more of a hassle than the soothing experience it should be. So what to do about it? Why not get your very own personal swimming pool? 

While building a pool can be time-consuming and expensive, it can be a great addition to a home and add serious equity and value to the home. The issue of finances will naturally be the most important factor, but there are plenty of ways to help pay for a pool.

How Does A Pool Loan Work?

A pool loan is most simply a personal loan that is used to finance the building of a swimming pool. These loans are typically unsecured installment loans, meaning that no collateral will be required to qualify. The debt will be repaid over a set period of time, called the term, with fixed monthly payments split evenly. Unsecured personal loans are available at banks, credit unions, and many places online, and each separate lender will have its own terms and offers. The most important factor in determining both the total amount offered and the interest rate will be your credit score. A lender will review this, and other factors such as income and employment to determine the risk value of the loan and set an interest rate. This rate will be factored into the total amount borrowed, and this new total will be divided by the months of the loan’s term.

What Do You Need To Qualify For A Pool Loan?

Lending agencies will want to know as much about you as possible before offering a loan. Most will have strict requirements about what the money will be used for, but that is no problem since we are talking about loans for a swimming pool. This type of loan is fairly common and shouldn’t be an issue for a lender. While the exact requirements for a loan will vary depending on the lender, this is a list of some of the more common ones:

  • Driver’s License or ID
  • Social Security Number
  • Employment Status
  • Total Amount and Sources of Monthly Income
  • Total Monthly Housing Cost
  • Home Equity
  • Available Liquid Assets
  • Retirement Assets

How Many Years Can You Finance A Pool Loan?

Most personal loans have terms that last about three to five years, but there is no real set limit for the most part. The lender of the loan will have their own preferences to length, but generally, a pool loan is offered with a term between two and 10 years. 

It’s important to note that the longer the term is, the lower the monthly payment will be, but that more money will be paid in interest. Most of the details of a pool loan will depend specifically on your personal finances and the project itself, but here are a few notes that could help paint a picture:

  • Above ground pools typically range from about $1,800 to $5,000 and average $2,800. A loan this small could be granted fairly easily and should not take more than 24 to 36 months to pay off comfortably. These pools are much easier than their counterparts and run into fewer issues as far as placements and permitting problems.

  • In-ground pools are much more expensive and usually range from $28,000 to $55,000, with an average of about $35,000. For a loan of this size, a lender will need much more information, and credit score will play an extremely important factor in whether it will be granted or not. A loan like this will probably be better suited to an eight-year term or higher. Additionally, in-ground pools will require excavation, and this cost can be very expensive and vary depending on the pool’s desired placement. Additionally, permits may be required for the digging and may require fees as well.

  • Maintenance costs for a pool should not be underestimated either, as they can range from $375 to $2,750 per year for basic upkeep. This does not include other increased costs to electricity, homeowners insurance, and real estate taxes. 

What Credit Score Is Needed For A Pool Loan?

In terms of the credit score required, the most crucial factor is how much is being requested. A few thousand dollars can typically be granted with fair or worse credit scores, but tens of thousands of dollars will almost certainly be denied. The rate that you will qualify for will depend not only on the lender but also on other personal factors such as income, existing debts, and credit history. While these numbers may not be exact, here is a good idea of what each credit range will get in terms of interest rate:

  • An excellent credit rating (720-850) will get an annual percentage rate of approximately 11.8%
  • A good credit rating (690-179) will get an annual percentage rate of approximately 17.4%
  • A fair credit rating (630-689) will get an annual percentage rate of approximately 23.4%
  • A bad credit rating (300-629) will get an annual percentage rate of approximately 28.7% 

What Are Other Options For Getting A Pool Loan?

Most pool installation companies will offer their own financing options to potential customers, but these deals are typically worked out in their favor, so they are best to avoid. However, getting a personal loan for such a large amount of money can be difficult, so here are some other options in order to secure the financing required:

  • Home Equity Loan: In order to install a pool then you must first own the home. If you own the home, then you are most likely paying on a mortgage. This is where a home equity loan comes into play. Home equity is the amount that the house is worth minus the amount left of the mortgage. In other words, the amount of money you have paid in mortgages before can be used to get money for the pool. The way it works is your home equity will be calculated and depending on the total amount you can qualify to borrow some of that money back in the form of a second mortgage.

    These loans are good for long-term projects such as financing a pool because they offer longer terms than most personal loans and lower interest rates as well. However, the reason is that the house is offered as collateral. Failure to repay this loan in the allotted time could result in forfeiture of the home, so it’s important to have a firm grasp of your finances before taking out this loan.

  • Home Equity Line of Credit: Also known as HELOC, this option also uses your home’s equity to create a line of revolving credit. While the loan will offer a one-time lump sum payment that will be repaid in evenly split monthly installments, this option typically comes with a 10 year drawing period and a 20 year repayment period. This is the better option for higher equity, and if the project will take time, and is impossible to know the exact costs before getting started. This loan type also uses the home as collateral, and failure to repay could result in forfeiture as well. 

The Takeaway

Getting a pool loan can be a little bit of a hassle, but it is far from impossible. Whether it’s the ever-popular personal loan or using the equity in your home for a loan or line of credit, there are many options available. 

There are many factors to consider when desiring to build a personal swimming pool, and the decision should not be made hastily. It’s important to have a highly detailed plan for costs and a well-thought-out budget before getting started. From there, it’s just a matter of selecting the loan type best suited for you and your financial situation. There are pros and cons to the various loan types possible so be sure to weigh out your options and consider the best and smartest path forward. 

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