If you’re thinking about purchasing an inground swimming pool, then chances are you’re also considering how you would pay for such a project. Although some consumers do pay for their inground swimming pool project with savings, the majority will finance the purchase in one way or another.
When dealing with financial institutions, there are generally 2 types of loans to choose from – secured and unsecured.
In basic terms, a secured loan is when the bank (lending institution) uses collateral (like your house) as a means of “securing” the loan. In other words, if you default on the loan, they can claim rights to your home (part of its value) so as to get their money back.
This type of loan is far and away the most common in the swimming pool construction industry as it allows homeowners to borrow against the equity that they have in their home in order to finance the project. Also, secured loans typically have lower interest rate and the payments can be spread over a longer period of time compared to other types of loans.
An unsecured loan is not attached to any collateral, which means the lending institution has not directly taken security over your home. As unsecured loans are more risky for the lending institution, generally speaking interest rates are higher and payment terms are spread over a shorter period of time.
Also, most lending institutions will not lend more than $30,0000 on an unsecured loan, although you’ll occasionally find some that will lend in the $40,000 range. If you’re considering a swimming pool and don’t know if you’ll qualify for a loan, we suggest two actions:
- Determine the current equity in your home so as to know if you’d be available for a home equity line (secured loan). If so, contact a lending institution so as to know their rates, programs, etc.
- Research lending institutions that offer unsecured loans and see if that amount will cover your swimming pool project. Also learn their rates, payment plans, etc.
Increasing the value of your Home
One thing to always consider is that a swimming pool will add value to your property. The majority of lending institutions will take into account the value of the swimming pool. Remember also that an inground swimming pool will also help improve the marketability of your home should you decide you wish to sell your home in the future.