How to Get a Loan for a New Shed

Melissa BrockUpdated May 31, 2023

Share this article:

Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

If you’re looking for a place to store lawn and gardening equipment, or you need a space to work on hobbies like painting or crafts, a shed could be a good option. Besides choosing a shed with the style, square footage, and functionality you need, you’ll also have to figure out how to pay for it. The average price of a shed is approximately $3,000 to $5,000, but depending on what you’re looking for, the cost could be far higher. Some high-end sheds can cost more than $30,000.Fortunately, shed financing is available to help cover the expense, including shed loans. Here’s everything you need to know about financing a shed to help pick the best option.

What Is Shed Financing?

When you don’t have the cash available to purchase a shed outright, you can use shed financing. That means you borrow money to purchase the shed, and you then repay what you borrowed in regular installments over time with interest.If you’re wondering, can you get a loan for a shed?, yes, you can. There are several different types of shed loans available, so you can choose the option that’s best for you. Recommended: Using a Personal Loan to Finance a Backyard Remodel

The Shed Buying Process

Before you begin shopping for a shed, check the zoning laws and permit requirements in your city or town. And if you belong to a homeowners association (HOA), find out about its rules regarding sheds. For example, your HOA may require you to keep a shed under a certain size, and the local zoning laws may stipulate that your shed be within a certain distance of your property line. You might also need a permit before you can put the shed in your yard. Look for information about zoning and permits on your local government’s website or call the office to ask, and also check with your HOA. You could be fined if you don’t follow regulations.Once you’ve done that due diligence, think carefully about the type of shed you want. Sheds come in all shapes, sizes, colors, and materials, including steel, vinyl, wood, and resin. You can choose from a variety of styles as well, such as lean-to, A-frame, barn style, and more. And don’t forget weather resistance. Waterproof sheds offer the most protection from weather damage.Next, decide whether you prefer a custom-built shed or one that’s prefabricated. In general, sheds range in price from $1,500 to $10,000, but you can often purchase a prefab shed for less than $1,000. The flooring and a foundation may be sold separately, however; if they are, you’ll need to factor them into the final price. A foundation can cost at least $4,000. Finally, do you want to build or install the shed yourself or would you rather have someone else build or install it on your property? Hiring someone to build a shed may cost between $350 (for a shed kit) and more than $40,000 for a customized shed, depending on the size and materials.

Types of Shed Financing Options

There are several methods of financing a shed, including different shed loans. Here’s more information about shed financing to help you pick the one that fits for your needs.

Personal Loans

Banks, credit unions, and online lenders offer personal loans. You apply for a loan, and if you meet the personal loan requirements, you’ll be approved. After approval, you’ll get a lump sum of money that you pay back with interest in installments over time. One of the main benefits of a personal loan is that it’s unsecured, meaning you don’t need an asset as collateral for the loan. In addition, personal loans are flexible, and you can use them for practically any purpose, including financing a shed. The interest rate you get for a personal loan may depend on your credit score, as well as your income, and the amount of debt you currently have. It's always a good idea to shop around for different personal loans and compare interest rates and terms.

Home Equity Loans

Home equity loans allow you to tap into the equity you have in your home. Typically, you need to have at least 15% equity to qualify for a home equity loan.Some of the main types of home equity loans include fixed-rate home equity loans, home equity lines of credit (HELOCs), and cash-out refinances. Each works a little differently.A fixed-rate home equity loan is similar to a second mortgage, and you repay the loan with interest. One of the differences between a home equity loan vs. personal loan is that you pay closing costs on a home equity loan.A HELOC allows you to withdraw money on a revolving basis up to your limit. It has a variable interest rate. A cash-out refinance allows you to refinance your mortgage for more than you owe and then take the extra amount in cash to pay for your shed. A cash-out refinance may have higher closing costs than a fixed-rate home equity loan.It’s important to be aware that home equity loans are secured loans, meaning your home serves as collateral for the loan. If you fail to repay the loan, you could lose your home.

Credit Cards

Credit cards can be a quick and easy method of financing a shed. However, credit cards have high interest rates, so unless you can pay off the shed quickly, you could end up owing a fair amount in interest.You could apply for a 0% intro APR credit card, which means you’ll pay no interest during the introductory period. If you can pay off the shed in full before that period ends, you’ll owe no interest on it. But if not, interest will kick in after the promotion ends.

Manufacturer Financing

Can you get a loan for a shed through the manufacturer? You can! Manufacturers and home improvement stores often offer loans and lines of credit. You may be able to find 0% interest credit cards through manufacturer financing. However, the 0% percent is typically only available for a certain period of time. After that, the interest rates on the remainder of what you owe could be high.There’s also rent-to-own financing, which means you make regular payments toward the shed, while renting it. Once you pay it off, the company transfers ownership of the shed to you. Just be aware that you’ll need to pay the first month’s rent and the last month’s rent in advance. Finally, manufacturers or stores may also offer installment loan financing with no money down. With an installment loan, you make payments over a certain period with interest. But the interest rates could be higher, and the repayment period might be shorter, than it is with other types of loans.

Factors to Consider When Choosing a Shed Financing Option

These are some of the important considerations to weigh when choosing between different shed financing options.

Interest Rates & Fees

When you borrow money with a shed loan, the lender charges you interest. You can check into the average personal loan interest rate to get a sense of what you might be looking at. In addition, certain financing options, like personal loans and home equity loans, may also come with fees. When you’re comparing loans, use the APR (annual percentage rate) rather than the interest rate. The APR includes interest and fees, and it more accurately represents the total cost of borrowing money.

Loan Terms & Repayment Options

Loan terms are the conditions you sign up for when you borrow money. They include:

Length of the loan, or how long you have to repay what you borrowed
How you repay the loan (such as monthly installments)
Interest rate
Fees, including penalty fees

Read the fine print in the loan agreement to make sure you understand all the terms of the loan before you sign the agreement.

Credit Score Requirements

Many forms of shed financing require a credit check in order to approve you for a loan. You may need to meet a certain minimum credit score, depending on the lender. Check with the lender to learn their specific credit score requirements for any loan you're considering.In addition, review your credit report to make sure it’s accurate and up to date. You can get a free copy of your credit report from the major credit bureaus or from AnnualCreditReport.com. If you find any errors on your credit report, notify the credit bureau right away.

Application Process & Approval Timeline

The application process and approval time for shed financing is usually quick. You may be approved the same day, or even in minutes, depending on the lender. Each lender has different parameters for application and approval. Once you sign the final loan documents, you’ll usually receive the funds in just a few business days.

How to Apply for Shed Financing

When you're ready to apply for a loan, first check your credit. The interest rate and loan amount you receive depends on how strong your credit is. You can also prequalify for a loan before submitting a formal application. Being preapproved doesn't mean you’ll get the loan, but it gives you a sense of the rates and terms you may qualify for.Next, shop around to different banks, online lenders, and credit unions, and compare offers. When you find one you like, submit a formal application for the loan. You’ll likely need to provide a photo ID and proof of employment and income. The lender will do a hard credit check, which could negatively impact your credit score temporarily. They’ll also look at your debt-to-income ratio (DTI), which is the amount of monthly debt you have compared to your gross monthly income.If you’re approved for the loan, carefully review the terms and conditions, including loan amount, interest rate, and length of the loan. If everything looks good, sign the documents, and the loan funds will be wired to your account within days.

Closing the Loan

In the case of a home equity loan, you can close on the loan after the loan processing has been completed. Closing works slightly differently for every lender. For example, a notary may need to be there when you sign your loan documents, and in some states, an attorney might be required. Once the loan closes, you have three business days to change your mind, otherwise known as the right of rescission. You will typically receive your money soon after closing.

The Takeaway

A shed can be a convenient place to store gardening equipment and your lawn mower, and you may even want to use it for certain hobbies, such as crafting. Sheds can be expensive, however, so if you can’t pay for your shed outright, you may want to consider shed financing. If you’re interested in taking out a personal loan to buy a shed, Lantern can help you find the best option. In our online marketplace, you’ll get offers from multiple lenders at once, making it quick and easy to compare rates and terms. Let Lantern help you today with your shed financing needs.

Frequently Asked Questions

Is it cheaper to build a shed or buy one?

What credit score do you need to finance a shed?

Do sheds devalue your current property value?

Photo credit: iStock/irina88w

LCPL0423013

About the Author

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Her work has appeared on Yahoo Finance, Entrepreneur, Investopedia, The Balance, FinanceBuzz, The Journal of College Admission, MarketBeat, College Finance, Rocket Mortgage, LeverageRx, Benzinga, Morty, Ally, and more.

Share this article: