If you love warm weather, the idea of sipping lemonade on the patio or splashing in the pool probably sounds like heaven. But if you don’t already have a pool and want to install one, your dreams could be crushed by sticker shock.
According to Home Advisor, it costs an average of $48,354 to install an in-ground pool. If you don’t have that money in the bank, you might be thinking about using swimming pool loans to finance your purchase. However, taking out a loan without doing your homework can be a costly mistake.
What are swimming pool loans?
Few people have enough savings for an emergency fund, let alone for a pool. Many people take out swimming pool loans to pay for the pool and other necessary costs, such as a filtration system or deck.
Here are the two main types of financing available for your pool.
1. Home equity loans
With a home equity loan, you borrow money using your home’s equity as collateral. Equity is the difference between your home’s value and what you’ve paid so far toward your mortgage.
For example, pretend you bought a home for $235,000. You work hard to pay down your mortgage, and now you owe just $170,000. Even better, your home’s value has risen to $250,000.
To calculate your home’s equity, subtract what you owe — $170,000 — from the current value of $250,000. Your home’s equity is $80,000.
According to the Federal Trade Commission, you’re usually limited to borrowing 85% of your home’s equity. If your home’s equity is $80,000, that means the most you can borrow is likely $68,000.
With a home equity loan, you generally can borrow as much as $150,000 and have up to 20 years to repay your loan. Because your home serves as collateral, there’s less risk to the lender. That means it can offer you lower interest rates. However, if you fall behind on the payments, you could lose your home.
2. Personal loans
Another option is to apply for an unsecured personal loan. With a personal loan, you work with a bank or financial institution to get the funds you need for your pool. However, there are some downsides to using personal loans.
Although unsecured loans don’t require any collateral, lenders typically charge higher interest rates than they do on home equity loans because unsecured loans are a bigger risk. In addition, personal loans tend to have shorter repayment terms than home equity loans.
Depending on your credit and income, you could qualify for a low-interest loan of just 4.98% or a loan with interest rates as high as 35.99%. If you have poor credit, high interest rates can cause your pool’s cost to skyrocket.
For example, if you applied for a personal loan for the cost of the average in-ground pool — $48,354 — and qualified for a five-year loan at 4.98%, you’d pay $6,369 in interest charges. By contrast, if you got a five-year loan at 35.99%, you’d pay $56,458 in interest charges alone. Your loan would end up being more than double the pool’s actual cost.
If you have your heart set on a pool, it’s a good idea to compare offers from multiple personal loan lenders. This way, you can find out what interest rates and terms are available to you before you apply.
When a swimming pool loan makes sense
Deciding to take out a swimming pool loan is a big decision, and it’s important to think it through carefully. Because of the risks associated with taking on more debt, there are only a few situations in which taking out a loan makes sense.
If you currently own a pool and it requires repairs for safety reasons, to adhere to homeowners association regulations, or to keep up with zoning requirements, taking out a loan can help you do what you need to do. Borrowing money can be more cost-effective than paying penalties or fines.
Alternatively, installing a swimming pool might be a good idea if you’re selling your home and most comparable houses in the area have pools. However, be sure to compare the costs of a loan with the selling price you can expect. If you can’t make a profit or just break even, it might not be worth taking out a loan.
When taking out a loan is a bad idea
Borrowing money for luxury items like swimming pools can be dangerous. However, people sometimes convince themselves that installing a pool is an investment.
If you want to install a pool because you think it will increase your home’s value, it might be time for a reality check. According to HouseLogic, the biggest increase in value you can expect is 7%.
That means that if you had a $250,000 home and installed a pool, your home’s value would increase by $17,500 at most. Although that’s a decent improvement, remember that the average pool costs over $48,000 to install. So, the cost to add a pool offsets any boost to your home’s value.
Plus, the installation costs and loan interest charges are only some of the expenses you’ll face. Maintaining a pool is pricey. In most areas, the law requires you to install a safety fence. Plus, you’ll need a filtration system, a heater if you live in a cooler climate, and chemicals to prevent algae, bacteria, and germs.
If you’d still love a pool for your family, it’s a good idea to save up for it instead of taking out a loan. Doing so will save you money and help you enjoy it without the burden of monthly payments.
Adding value to your home
Taking out swimming pool loans can be a costly investment without much return. If you’re looking to improve the sale price of your house, check out these five strategies you can use to boost your home’s appraisal value.
Interested in a personal loan?
Here are the top personal loan lenders of 2019!| Lender | APR Range | Loan Amount | |
|---|---|---|---|
1 Includes AutoPay discount. Important Disclosures for SoFi. SoFi Disclosures
2 Includes AutoPay discount. Important Disclosures for Payoff. Payoff Disclosures
3 Important Disclosures for FreedomPlus. FreedomPlus Disclosures
4 Important Disclosures for Citizens Bank. Citizens Bank Disclosures
5 Important Disclosures for LendingPoint. LendingPoint Disclosures
6 Important Disclosures for LendingClub. LendingClub DisclosuresAll loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.95% to 35.89%*. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 94105. †Per reviews collected and authenticated by Bazaarvoice in compliance with the Bazaarvoice Authentication Requirements, supported by anti-fraud technology and human analysis. All reviews can be reviewed at reviews.lendingclub.com **Based on approximately 60% of borrowers who received offers through LendingClub’s marketing partners between January 1, 2018 to July 20,2018. The time it will take to fund your loan may vary. 7 Important Disclosures for Earnest. Earnest Disclosures
8 Important Disclosures for Avant. Avant Disclosures* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC. ** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33 * Important Disclosures for Upgrade Bank. Upgrade Bank Disclosures* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements. ** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days. |
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 | 5.74% – 16.99%1 | $5,000 - $100,000 | |
 | 7.54% – 35.99% | $1,000 - $50,000 | |
 | 7.99% – 35.89%* | $1,000 - $50,000 | |
 | 5.99% – 24.99%2 | $5,000 - $35,000 | |
 | 5.99% – 29.99%3 | $7,500 - $40,000 | |
 | 6.79% – 20.89%4 | $5,000 - $50,000 | |
 | 9.99% – 35.99%5 | $2,000 - $25,000 | |
 | 6.95% – 35.89%6 | $1,000 - $40,000 | |
 | 6.99% – 18.24%7 | $5,000 - $75,000 | |
 | 9.95% – 35.99%8 | $2,000 - $35,000 | |