Why You Should Think Twice About Swimming Pool Loans

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 2018!

Lender	Rates (APR)	Loan Amount
1 Includes AutoPay discount. Important Disclosures for SoFi. SoFi Disclosures Personal Loans: Fixed rates from 6.58% APR to 14.87% APR (with AutoPay). Variable rates from 6.275% APR to 12.575% APR (with AutoPay). SoFi rate ranges are current as of July 16, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.275% APR assumes current 1-month LIBOR rate of 2.10% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org) 2 Important Disclosures for Citizens Bank. Citizens Bank Disclosures Personal Loan Rate Disclosure: Fixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount. * Important Disclosures for Upgrade Bank. Upgrade Bank Disclosures Personal Loan Rate Disclosure: Fixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.
	7.73% – 29.99%	$1,000 - $50,000	Visit Upstart Check rate nowon SLH's secure site
	6.28% – 14.87%1	$5,000 - $100,000	Visit SoFi Check rate nowon SLH's secure site
	6.87% – 35.97%*	$1,000 - $50,000	Visit Upgrade
	8.00% – 25.00%	$5,000 - $35,000	Visit Payoff Check rate nowon SLH's secure site
	4.99% – 29.99%	$10,000 - $35,000	Visit FreedomPlus
	5.99% – 18.99%2	$5,000 - $50,000	Visit Citizens
	15.49% – 34.49%	$2,000 - $25,000	Visit LendingPoint
	5.99% – 35.89%	$1,000 - $40,000	Visit LendingClub
	5.49% – 18.24%	$5,000 - $75,000	Visit Earnest
	9.95% – 35.99%	$2,000 - $35,000	Visit Avant