May 28, 2020

Pool Financing: 10 Things You Need to Know

Building a pool or renovating an old one is a good way to improve your home. However, swimming pool projects like redoing your pool plaster or having a pool resurfacing often involve services that require a large sum of money. To help pool owners pay for the costs of remodeling and renovating their pools, they often reach out to lenders for help. In fact, it’s common for many homeowners to borrow money to help finance a pool.

If you’re a pool owner looking to renovate and remodel your pool through swimming pool financing, here are 10 things you need to know.

1. Pool Financing Options

One good thing to keep in mind when borrowing money for your pool project is you have multiple options in pool financing. Knowing what these options are will help you make the best decision before you make that commitment. That said, here are some of the most common pool financing options on the market.

Unsecured Loan

An unsecured loan, or a personal loan, is a type of loan that you can get from credit unions, banks, as well as online and peer-to-peer lenders. There are two advantages to using a personal loan that make it a more appealing option to many pool owners.

First, and arguably the best, is that unsecured personal loans do not require collateral. You don’t have to put your property at risk, although personal loans may, at times, have higher interest rates and will have fixed payment plans. Second, the application process involved with unsecured personal loans tends to be simple compared to others.

Unsecured personal loans will have shorter payment terms, which means that you’ll know just exactly when your loan will be paid off and you’ll only have to be bothered with making payments for a short amount of time.

Secured Loan

Another option you’ll come across when exploring your choices are secured loans. Secured loans are often offered by banks and other large financial institutions. Like unsecured loans, secured loans also offer their own sets of advantages.

Secured loans will often have longer payment terms compared to personal loans. Unsecured personal loans will generally have terms ranging from 12 months to 7 years while secured loans oftentimes last anywhere from 10 to 15 years. This will allow you to better handle your finances and deal with your loan, since you won’t be pressed for time coming up with the money to pay it off. They will also have better interest rates compared to unsecured loans.

However, secured loans require collateral, so you might end up with a foreclosed property if you’re unable to keep up with your payments. The process required for a secured loan application may also involve more paperwork compared to that of an unsecured personal loan.

In-House Pool Financing

In-house pool financing is a type of pool loan provided to you by your pool contractor. Your pool contractor will either use his or her own funds or partner up with financial institutions and lending companies to help provide the financial aid you need.

One of its most appealing advantages is that it makes the process of pool financing more convenient. Because in-house pool financing is an additional service provided by your pool contractor, the application process is often faster. Your pool contractor will have almost all the necessary details on hand and they can help you process the loan application, giving you a better chance of getting that approval.

The only drawback to using an in-house pool financing or contractor-arranged pool loans is that your options might be limited. Because you can only go with the lending partners working with your contractor, your options may not be as broad as with using secured and unsecured loans.

The bottom line is that knowing the options you have available will help you make a better decision when financing your pool. Whether you’re eyeing for an unsecured personal loan, a secured loan, or a pool contractor-arranged pool loan, understanding your finances and how much money you have to pay for your pool loan will help you plan a better approach to pool financing.

2. Other Sources

Apart from the aforementioned financing options, you can also draw funds from other sources. Considered as a viable alternative, your 401(k) is a good source to finance your pool if you’ve explored all other financing possibilities. It’s not common for pool owners to be aware they can use their retirement savings account to fund their pool project. The good thing about borrowing money from a 410(k) account is that you’re basically borrowing money from your own retirement account, so you’re not involving any party when using your 410(k) plan in financing your pool.

Your retirement savings account loan needs to be paid in full within five years of the determined withdrawal date. This should give you enough time to manage your finances and make payments for your loan with ease. Should you fail to make the payment within the predetermined time frame, you will incur a 10% early withdrawal penalty.

Apart from your 410(k) account, you can also use your own personal savings account to fund your swimming pool project. Your personal savings account can act as a collateral, through programs known as “passbook loans” and “savings secured loans.” However, you can only borrow an amount not exceeding the balance in your personal savings account.

That said, you can check these other sources of funds to broaden your options in pool financing.

3. Pool Financing Interest Rates

Aside from being aware of your pool financing options, you should also be aware of the interest rates involved when borrowing money for building, renovating, or remodeling your pool. Interest rates will vary depending on the institution you borrow the money from and the type of swimming pool financing you choose. As we’ve briefly covered above, borrowing money using an unsecured loan may merit higher interest rates compared to using a secured loan to finance your pool.

When researching lending companies and deciding which to use, it’s best to take into consideration the interest rates and not get swayed on longer terms. You might end up paying more than you should because of high interest rates. Say you’re borrowing $40,000 or your swimming pool project with a 10% interest rate under a 4-year payment term. You’re looking at a $1,015 monthly payment and a total interest of $8,696.16. Because of the interest costs, you’d be paying $9,000 more for your pool to either be built or remodeled.

Some pool loans can go for as low as 5% in annual percentage rates to about 36% and even higher for other institutions and financing options.

4. Pool Financing Requirements

Like any other type of loan, applying for a pool loan involves submission of particular requirements. Here are just some of the common requirements that will be asked when you apply for pool financing.

  • Social Security Number
  • Driver’s License
  • Financial Assets
  • Collateral Assets
  • Sources of Income
  • Registered Businesses
  • Total Monthly Housing Cost

Lenders will look into several factors including your credit score and the amount to be financed – two factors that tell them whether you’re a credit risk. Depending on the type of financing you’re aiming for, the required or recommended credit score varies. Nevertheless, most lenders will want to see five or more years of good credit history that involves various account types like mortgages, auto loans, and credit cards. It helps them see that you’re a good payer and that you stick to your commitments. It’s also helpful if they can see any ability to save as represented by sizable down payments. Lastly, a stable and adequate source of income is important, which ensures the lender that you have the capacity to pay for the loan.

5. Consolidating Your Debt

Chances are, before you apply for pool financing, you may have other existing loans. This is normal amongst many homeowners. The older we get, the more bills we have to pay. That said, owing money from several creditors and lenders can be a hassle. This will also add up to the interest payments from each of the debts you owe.

To avoid incurring multiple interest rates and the inconvenience of juggling a sundry of bills, you can consolidate your pool loan together with your existing debt. Some financial institutions offer consolidated loans where the idea is you loan the amount you need for your pool project plus the amount you need to pay off your other loans. This way, you get to pay your credit cards and other debts in one fell swoop and all you have to worry about is paying for your current loan.

6. You Can Finance a Part of the Total Cost

Some pool owners choose to save up and pay cash for the remodeling and renovation of their pools. However, in some cases, they do find that the cash they saved up may not be enough to cover the sum of their pool remodeling project; they might need to seek assistance from lenders or financial organizations. That said, it is common for pool owners to finance only a part of their swimming pool project. You can use the money you saved up to cover for the basic costs like pool replastering and pool resurfacing. Then, you can apply for a loan in the amount needed to complete the added fixtures to accompany your pool.

Costs of pool deck renovation and installation of new swimming pool equipment are just some of the things you can add to your backyard to accentuate your private pool and make your pool stand out.

Financing only a portion of the cost of your pool can help you save money and lessen your debt. Pool financing can be flexible; you’re not required to finance the overall costs of building or remodeling your swimming pool.

7. Pool Financing Terms

Just like any other loan, pool financing involves plans and payment terms. As we’ve briefly covered above, different financing options offer different payment terms. In the case of unsecured personal loans, the usual payment terms range from 12 months to 7 years while that of a secured loan will often be 10 to 15 years. In-house pool financing will also vary depending on what type of financing option your pool contractor has to offer, and tapping into your 410(k) savings will give you five years to pay the amount you’ve borrowed.

The idea is, the longer the term, the higher the interest rates usually are and vice versa. However, the longer the payment plan is, the smaller your monthly payments will be. That’s because the total loan amount will be divided into longer payment terms. Shorter payment plans will usually leave you with larger monthly payments. With this in mind, you can make better decisions in applying for pool financing.

8. Online Pool Financing Calculators Help

Evaluating your budget and your financing options may be difficult, especially those new to the concept of pool financing. That’s why many lenders and pool professionals put up free pool financing calculators on their websites. A pool financing calculator allows you to understand the basic concept of pool financing and allows you to have an idea of how much to put forward for your pool.

Pool financing calculators are generally simple and straightforward. All you need to do is to enter the details in the necessary fields and the pre-programed software does the computing for you.

9. Know How Much You Can Afford

You have to set realistic expectations when planning for a pool project. That’s because the amount of money you can loan for usually depends on several factors including your earning capacity. That’s the reason why lenders ask for requirements like sources of income, financial and collateral assets, registered businesses, and the like. Your ability to make the payment and keep up with it depends on how much you can afford.

Setting realistic goals will help you make proper plans in terms of how much work is to be done in your pool and how much money you can loan for your project.

10. Commit to Your Pool Loan

Lastly, you need to be aware that you will incur fees if you’re unable to keep up with your monthly payments. Committing to the pool financing option you’ve chosen means that you have to make the payment on the agreed monthly terms.

Not making payments on time will not only merit fees, but it may also leave you with a bad credit score.

So, these are the 10 things you should be aware of before you plunge into pool financing. We hope you enjoy reading this list as much as we’ve enjoyed writing it for you. For all your swimming pool needs, contact Stanton Pools. We offer superior quality pool services and remodeling. Check us out today!

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