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Swimming pools may enhance the fair market value of your residential property. Homeowners can consider a variety of borrowing options to pay for the cost of installing a swimming pool, including home equity loans, personal loans, financing through the merchant, home equity lines of credit, cash-out refinancing, and personal lines of credit.Aboveground swimming pools can cost thousands of dollars, while the cost of installing an inground swimming pool can cost tens of thousands of dollars. Below we describe how loans for swimming pools work and highlight other considerations you may take into account when financing a swimming pool.
What Are Pool Loans?
Pool loans refer to any financial lending product where you borrow money to pay for the cost of building and installing a swimming pool. As mentioned above, home equity loans, personal loans, merchant financing, home equity lines of credit, cash-out refinancing, and personal lines of credit may all serve as pool loans.Adding a swimming pool to your property can cost over $100,000 in some cases and may enhance the fair market value of your home to a certain degree, so homeowners may consider a variety of loan options before making such a major purchase.
How Does a Loan for a Pool Work?
The way a loan for a pool works is you borrow money from a lender and use the money to help pay for the cost of installing a swimming pool. The loan agreement may include terms and conditions defining your total repayment obligations.Whether the pool loan is an installment loan or revolving credit, you will be expected to pay down the debt over a period of time, including any outstanding principal and interest you owe. Defaulting on an unsecured pool loan may cause your credit score to drop drastically and can impact your ability to access new credit in the future.Defaulting on a secured pool loan can severely damage your credit and empower the lender to seize your property as collateral.
What Are Typical Pool Loan Terms?
Typical pool loan terms may give you years or decades to pay off the loan in full. For example, a home equity loan can provide you with a lump sum of money for purchasing an inground swimming pool in which you make monthly repayments over a lengthy term up to 30 years.Taking out a personal loan for the purpose of buying a swimming pool may include a repayment term as short as 12 months or as long as 12 years in some cases. Loans with longer terms may carry higher interest rates but lower monthly payments compared with similar loan products featuring shorter terms.Using revolving credit to purchase a swimming pool can give you the flexibility to pay off the debt with no particular end date by making monthly minimum payments or greater.
What Is a Good Rate for a Pool Loan?
A good rate of interest for a pool loan depends on the lending product. Collateralized loans typically have lower rates of interest than unsecured loans. A good interest rate on a collateralized or secured pool loan could be anything under 6%, while a good interest rate on an unsecured pool loan could be anything under 9%.The average interest rate on a two-year personal loan stood at 9.39% during the third quarter of 2021, according to Federal Reserve data. This suggests any borrowers who took out a two-year personal loan with an interest rate below 9% had a particularly good rate of interest compared with the average borrower.A September 2020 research paper published by the University of Pennsylvania’s Wharton School Pension Research Council found the average interest rate of a home equity line of credit or second mortgage stood at 5.93%. This suggests any homeowners who borrowed against the equity of their homes with an interest rate below 6% had a particularly good rate of interest compared with the average borrower.
What Credit Score Is Needed for a Pool Loan?
Consumers with good credit scores above 670 are more likely to be approved for a pool loan compared with consumers who have poor credit scores below 670. Some of the major credit scoring models, including VantageScore® 4.0 and base FICO® Scores, range from 300 to 850.Borrowers with poor credit may apply for a bad credit loan to help finance the installation of a swimming pool. Lenders may offer the lowest rates of interest to borrowers with excellent credit scores above 760. Consumers with any credit scores could potentially take out a pool loan, but those with poor credit may have difficulty getting approved for unsecured credit.Personal loans for fair credit could also be a pool financing option for borrowers with subprime credit scores. A subprime or fair credit score can range between 580 and 669, according to Experian, a major credit reporting agency.
Ways to Finance Your New Pool
Here are some of the ways to finance your new pool:
Home Equity Loan
Home equity loans can provide homeowners with a lump sum of money for financing the installation of a swimming pool. These loans allow homeowners to borrow against the equity of their home, where the equity in your home is determined by subtracting the outstanding balance of any existing mortgage from the appraised value of your property.Borrowers are expected to repay the home equity loan over a set term, and the lender may foreclose on your home if you default on the loan. Some lenders may allow you to borrow up to 80% of the equity in your home.
Personal Loan
You may finance a new swimming pool by borrowing money under what is a personal loan financial product. Some lenders may offer personal loans in the amount of $3,000 to $100,000 and repayment terms ranging from 12 months to 12 years on a fixed rate of interest.As mentioned earlier, aboveground swimming pools can cost thousands of dollars, while the cost of installing an inground swimming pool can cost tens of thousands of dollars. Personal loans can provide you with a lump sum of money within several business days, but consumers with poor credit may have a harder time qualifying for a large personal loan above $40,000.Being prequalified or preapproved for a loan does not guarantee you will get approved for the loan, but personal loan preapproval can help you determine whether you can afford a large personal loan for financing a new swimming pool.
Swimming Pool Loan Through the Dealer
A pool dealer or merchant may offer financing options to help you pay for the cost of designing and installing a new swimming pool. These dealers may refer you to lending partners who provide loan amounts up to $100,000 under flexible terms. A swimming pool loan through the dealer can be secured or unsecured.
HELOC
A home equity line of credit, also known as a HELOC, is a revolving line of credit that can help you finance the installation of a new swimming pool. With a HELOC, homeowners can borrow against the available equity in their homes during a draw period that may run for several years.Homeowners with good credit scores and low debt-to-income ratios have the best chance of getting approved for a HELOC. Failing to repay a HELOC can result in home foreclosure.
Cash-Out Refinance
A cash-out refinance is a mortgage refinancing option that may allow you to withdraw a lump sum of cash from the available equity in your home for the purpose of building and installing a swimming pool. Cash-out refinance is a secured consumer lending product that can lead to foreclosure if the borrower fails to repay the loan.
Personal Lines of Credit
Borrowers may use a personal line of credit to pay for the cost of building and installing a new swimming pool. Personal lines of credit are revolving forms of credit that can allow you to withdraw funds from the account up to the credit limit. Some consumers may qualify for personal lines of credit with large borrowing limits exceeding $100,000.Borrowers can pay off their personal line of credit debt on a flexible timeline with minimum monthly payments or greater. Some personal lines of credit may charge annual or monthly maintenance fees in addition to any principal and interest payments you owe.
Other Considerations When Financing a Swimming Pool
Here are some additional factors to consider when financing a swimming pool:
Maintenance Costs
After building and installing a swimming pool, the maintenance costs of keeping it clean and preserving its structural integrity can cost $3,000 to $5,000 per year, according to HomeAdvisor. Ongoing maintenance costs could make it harder for borrowers to meet their monthly payment obligations on a swimming pool loan.Recommended: How Much Does Pool Resurfacing Cost?
Repayment Term
Some swimming pool loans may have specific repayment terms. A repayment term is the total length of time you have to repay the loan in full. Loan terms for swimming pools may range from 12 months to 30 years. A longer repayment term gives you more time to pay off your swimming pool loan, but longer repayment terms may also generate more interest charges over the life of the loan compared with shorter terms.
Monthly Payment
Interest rates and term lengths can impact your monthly payment obligations on a swimming pool loan. A longer repayment term can minimize your monthly payment obligations but saddle you with more interest charges over the life of the loan. Your monthly payments on a swimming pool loan may go toward principal and interest.
The Takeaway
A swimming pool is a costly amenity that can promote entertainment and recreational activities on your personal property. This large-scale investment also commands ongoing maintenance costs in addition to your initial installation expenses.When searching for financing options, Lantern by SoFi can help you get a personal loan from the lender of your choice. Just provide basic information about yourself and the loan you need, and Lantern can present personalized rates and options you may consider.
Frequently Asked Questions
What are typical pool loan terms?
What is a good rate for a pool loan?
What credit score is needed for a pool loan?
Photo credit: iStock/Dreamer Company
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About the Author
Sulaiman Abdur-Rahman
Sulaiman Abdur-Rahman writes about personal loans, auto loans, student loans, and other personal finance topics for Lantern. He’s the recipient of more than 10 journalism awards and currently serves as a New Jersey Society of Professional Journalists board member. An alumnus of the Philadelphia-based Temple University, Abdur-Rahman is a strong advocate of the First Amendment and freedom of speech.
