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If you own a home, you may be interested in tapping into your available home equity. One popular way to do that is with a home equity line of credit. This is different from a home equity loan, and can help you finance a major renovation or many other expenses.

Homeowners sitting on at least 20% equity — the home’s market value minus what is owed — may be able to secure a HELOC.Let’s take a look at what is a HELOC, how it works, the pros and cons and what alternatives to HELOC might be.

How Does a HELOC Work?

The purpose of a HELOC is to tap your home equity to get some cash to use on a variety of expenses. Home equity lines of credit offer what’s known as a revolving line of credit, similar to a credit card, and usually have low or no closing costs. The interest rate is likely to be variable (more on that in a minute), and the amount available is typically up to 85% of your home’s value, minus whatever you may still owe on your mortgage.

Once you secure a HELOC with a lender, you can draw against your approved credit line as needed until your draw period ends, which is usually 10 years. You then repay the balance over another 10 or 20 years, or refinance to a new loan. Worth noting: Payments may be low during the draw period; you might be paying interest only. You would then face steeper monthly payments during the repayment phase. Carefully review the details when apply

Here’s a look at possible HELOC uses:

•   HELOCs can be used for anything but are commonly used to cover big home expenses, like a home remodeling costs or building an addition. The average spend on a bath remodel in 2023 topped $9,000 according to the American Housing Survey, while a kitchen remodel was, on average, almost $17,000.

•   Personal spending: If, for example, you are laid off, you could tap your HELOC for cash to pay bills. Or you might dip into the line of credit to pay for a wedding (you only pay interest on the funds you are using, not the approved limit).

•   A HELOC can also be used to consolidate high-interest debt. Whatever homeowners use a home equity credit line or home equity loan for — investing in a new business, taking a dream vacation, funding a college education — they need to remember that they are using their home as collateral. That means if they can’t keep up with payments, the lender may force the sale of the home to satisfy the debt.

HELOC Options

Most HELOCs offer a variable interest rate, but you may have a choice. Here are the two main options:

•   Fixed Rate With a fixed-rate home equity line of credit, the interest rate is set and does not change. That means your monthly payments won’t vary either. You can use a HELOC interest calculator to see what your payments would look like based on your interest rate, how much of the credit line you use, and the repayment term.

•   Variable Rate Most HELOCs have a variable rate, which is frequently tied to the prime rate, a benchmark index that closely follows the economy. Even if your rate starts out low, it could go up (or down). A margin is added to the index to determine the interest you are charged. In some cases, you may be able to lock a variable-rate HELOC into a fixed rate.

•   Hybrid fixed-rate HELOCs are not the norm but have gained attention. They allow a borrower to withdraw money from the credit line and convert it to a fixed rate.

Note: SoFi does not offer hybrid fixed-rate HELOCs at this time.

HELOC Requirements

Now that you know what a HELOC is, think about what is involved in getting one. If you do decide to apply for a home equity line of credit, you will likely be evaluated on the basis of these criteria:

•   Home equity percentage: Lenders typically look for at least 15% or more commonly 20%.

•   A good credit score: Usually, a score of 680 will help you qualify, though many lenders prefer 700+. If you have a credit score between 621 and 679, you may be approved by some lenders.

•   Low debt-to-income (DTI) ratio: Here, a lender will see how your total housing costs and other debt (say, student loans) compare to your income. The lower your DTI percentage, the better you look to a lender. Your DTI will be calculated by your total debt divided by your monthly gross income. A lender might look for a figure in which debt accounts for anywhere between 36% to 50% of your total monthly income.

Other angles that lenders may look for is a specific income level that makes them feel comfortable that you can repay the debt, as well as a solid, dependable payment history. These are aspects of the factors mentioned above, but some lenders look more closely at these as independent factors.

Example of a HELOC

Here’s an example of how a HELOC might work. Let’s say your home is worth $300,000 and you currently have a mortgage of $200,000. If you seek a HELOC, the lender might allow you to borrow up to 80% of your home’s value:

   $300,000 x 0.8 = $240,000

Next, you would subtract the amount you owe on your mortgage ($200,000) from the qualifying amount noted above ($240,000) to find how big a HELOC you qualify for:

   $240,000 – $200,000 = $40,000.

One other aspect to note is a HELOC will be repaid in two distinct phases:

•   The first part is the draw period, which typically lasts 10 years. At this time, you can borrow money from your line of credit. Your minimum payment may be interest-only, though you can pay down the principal as well, if you like.

•   The next part of the HELOC is known as the repayment period, which is often also 10 years, but may vary. At this point, you will no longer be able to draw funds from the line of credit, and you will likely have monthly payments due that include both principal and interest. For this reason, the amount you pay is likely to rise considerably.

Difference Between a HELOC and a Home Equity Loan

Here’s a comparison of a home equity line of credit and a home equity loan.

•   A HELOC is a revolving line of credit that lets you borrow money as needed, up to your approved credit limit, pay back all or part of the balance, and then borrow up to the limit again through your draw period, typically 10 years.

   The interest rate is usually variable. You pay interest only on the amount of credit you actually use. It can be good for people who want flexibility in terms of how much they borrow and how they use it.

•   A home equity loan is a lump sum with a fixed rate on the loan. This can be a good option when you have a clear use for the funds in mind and you want to lock in a fixed rate that won’t vary.

Borrowing limits and repayment terms may also differ, but both use your home as collateral. That means if you were unable to make payments, you could lose your home.

Recommended: What are the Different Types of Home Equity Loans?

What Is the Process of Applying for a HELOC?

If you’re ready to apply for a home equity line of credit, follow these steps:

•   First, it’s wise to shop around with different lenders to reveal minimum credit score ranges required for HELOC approval. You can also check and compare terms, such as periodic and lifetime rate caps. You might also look into which index is used to determine rates and how much and how often it can change.

•   Then, you can get specific offers from a few lenders to see the best option for you. Banks (online and traditional) as well as credit unions often offer HELOCs.

•   When you’ve selected the offer you want to go with, you can submit your application. This usually is similar to a mortgage application. It will involve gathering documentation that reflects your home’s value, your income, your assets, and your credit score. You may or may not need a home appraisal.

•   Lastly, you’ll hopefully hear that you are approved from your lender. After that, it can take approximately 30 to 60 days for the funds to become available. Usually, the money will be accessible via a credit card or a checkbook.

How Much Can You Borrow With a HELOC?

Depending on your creditworthiness and debt-to-income ratio, you may be able to borrow up to 90% of the value of your home (or, in some cases, even more), less the amount owed on your first mortgage.

Thought of another way, most lenders require your combined loan-to-value ratio (CLTV) to be 90% or less for a home equity line of credit.

Here’s an example. Say your home is worth $500,000, you owe $300,000 on your mortgage, and you hope to tap $120,000 of home equity.

Combined loan balance (mortgage plus HELOC, $420,000) ÷ current appraised value (500,000) = CLTV (0.84)

Convert this to a percentage, and you arrive at 84%, just under many lenders’ CLTV threshold for approval.

In this example, the liens on your home would be a first mortgage with its existing terms at $300,000 and a second mortgage (the HELOC) with its own terms at $120,000.

How Do Payments On a HELOC Work?

During the first stage of your HELOC (what is called the draw period), you may be required to make minimum payments. These are often interest-only payments.

Once the draw period ends, your regular HELOC repayment period begins, when payments must be made toward both the interest and the principal.

Remember that if you have a variable-rate HELOC, your monthly payment could fluctuate over time. And it’s important to check the terms so you know whether you’ll be expected to make one final balloon payment at the end of the repayment period.

Pros of Taking Out a HELOC

Here are some of the benefits of a HELOC:

Initial Interest Rate and Acquisition Cost

A HELOC, secured by your home, may have a lower interest rate than unsecured loans and lines of credit. What is the interest rate on a HELOC? The average HELOC rate in mid-November of 2024 was 8.61%.

Lenders often offer a low introductory rate, or teaser rate. After that period ends, your rate (and payments) increase to the true market level (the index plus the margin). Lenders normally place periodic and lifetime rate caps on HELOCs.

The closing costs may be lower than those of a home equity loan. Some lenders waive HELOC closing costs entirely if you meet a minimum credit line and keep the line open for a few years.

Taking Out Money as You Need It

Instead of receiving a lump-sum loan, a HELOC gives you the option to draw on the money over time as needed. That way, you don’t borrow more than you actually use, and you don’t have to go back to the lender to apply for more loans if you end up requiring additional money.

Only Paying Interest on the Amount You’ve Withdrawn

Paying interest only on the amount plucked from the credit line is beneficial when you are not sure how much will be needed for a project or if you need to pay in intervals.

Also, you can pay the line off and let it sit open at a zero balance during the draw period in case you need to pull from it again later.

Cons of Taking Out a HELOC

Now, here are some downsides of HELOCs to consider:

Variable Interest Rate

Even though your initial interest rate may be low, if it’s variable and tied to the prime rate, it will likely go up and down with the federal funds rate. This means that over time, your monthly payment may fluctuate and become less (or more!) affordable.

Variable-rate HELOCs come with annual and lifetime rate caps, so check the details to know just how high your interest rate might go.

Potential Cost

Taking out a HELOC is placing a second mortgage lien on your home. You may have to deal with closing costs on the loan amount, though some HELOCs come with low or zero fees. Sometimes loans with no or low fees have an early closure fee.

Your Home Is on the Line

If you aren’t able to make payments and go into loan default, the lender could foreclose on your home. And if the HELOC is in second lien position, the lender could work with the first lienholder on your property to recover the borrowed money.

Adjustable-rate loans like HELOCs can be riskier than others because fluctuating rates can change your expected repayment amount.

It Could Affect Your Ability to Take On Other Debt

Just like other liabilities, adding on to your debt with a HELOC could affect your ability to take out other loans in the future. That’s because lenders consider your existing debt load before agreeing to offer you more.

Lenders will qualify borrowers based on the full line of credit draw even if the line has a zero balance. This may be something to consider if you expect to take on another home mortgage loan, a car loan, or other debts in the near future.

What Are Some Alternatives to HELOCs

If you’re looking to access cash, here are HELOC alternatives.

Cash-Out Refi

With a cash-out refinance, you replace your existing mortgage with a new mortgage given your home’s current value, with a goal of a lower interest rate, and cash out some of the equity that you have in the home. So if your current mortgage is $150,000 on a $250,000 value home, you might aim for a cash-out refinance that is $175,000 and use the $25,000 additional funds as needed.

Lenders typically require you to maintain at least 20% equity in your home (although there are exceptions). Be prepared to pay closing costs.

Generally, cash-out refinance guidelines may require more equity in the home vs. a HELOC.

Recommended: Cash Out Refi vs. Home Equity Line of Credit: Key Differences to Know

Home Equity Loan

What is a home equity loan again? It’s a lump-sum loan secured by your home. These loans almost always come with a fixed interest rate, which allows for consistent monthly payments.

Personal Loan

If you’re looking to finance a big-but-not-that-big project for personal reasons and you have a good estimate of how much money you’ll need, a low-rate personal loan that is not secured by your home could be a better fit.

With possibly few to zero upfront costs and minimal paperwork, a fixed-rate personal loan could be a quick way to access the money you need. Just know that an unsecured loan usually has a higher interest rate than a secured loan.

A personal loan might also be a better alternative to a HELOC if you bought your home recently and don’t have much equity built up yet.

The Takeaway

If you are looking to tap the equity of your home, a HELOC can give you money as needed, up to an approved limit, during a typical 10-year draw period. The rate is usually variable. Sometimes closing costs are waived. It can be an affordable way to get cash to use on anything from a home renovation to college costs.

SoFi now offers flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively low rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit brokered by SoFi.

FAQ

What can you use a HELOC for?

It’s up to you what you want to use the cash from a HELOC for. You could use it for a home renovation or addition, or for other expenses, such as college costs or a wedding.

How can you find out how much you can borrow?

Lenders typically require 20% equity in your home and then offer up to 90% or even more of your home’s value, minus the amount owed on your mortgage. There are online tools you can use to determine the exact amount, or contact your bank or credit union.

How long do you have to pay back a HELOC?

Typically, home equity lines of credit have 20-year terms. The first 10 years are considered the draw period and the second 10 years are the repayment phase.

How much does a HELOC cost?

When evaluating HELOC offers, check interest rates, the interest-rate cap, closing costs (which may or may not be billed), and other fees to see just how much you would be paying.

Can you sell your house if you have a HELOC?

Yes, you can sell a house if you have a HELOC. The home equity line of credit balance will typically be repaid from the proceeds of the sales when you close, along with your mortgage.

Does a HELOC hurt your credit?

A HELOC can hurt your credit score for a short period of time. Applying for a home equity line can temporarily lower your credit score because a hard credit pull is part of the process when you seek funding. This typically takes your score down a bit.

How do you apply for a HELOC?

First, you’ll shop around and collect a few offers. Once you select the one that suits you best, applying for a HELOC involves sharing much of the same information as you did when you applied for a mortgage. You need to pull together information on your income and assets. You will also need documentation of your home’s value and possibly an appraisal.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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If you’re married and struggling to pay off multiple debts, you might consider applying for a debt consolidation loan jointly with your spouse. This approach allows you to roll multiple loan payments into a single monthly payment, which can simplify your household finances, reduce stress, and potentially save money.

Depending on your — and your spouse’s — income and credit score, getting a debt consolidation for married couples could help you qualify for a lower rate and/or better terms compared to applying on your own. However, there are also some downsides to consolidating debt when you get married. Here’s what you need to know.

What Are Debt Consolidation Loans?

A debt consolidation loan allows you to combine your outstanding debt balances into one loan, leaving you with a single monthly payment. In other words, you take out a new loan and use the proceeds to pay off your existing debt.

You can use a debt consolidation loan to combine different types of debt, like credit cards, personal loans, and medical debt. It won’t erase your debts, but it can make things easier by simplifying your payments. If you can qualify for a debt consolidation loan with a lower interest than what you’re paying on your current debts, you could also save money.

Typically, debt consolidation loans are unsecured personal loans, meaning they don’t require collateral. However, some people choose to use secured loans, like a home equity loan, to consolidate debt. Either way, the goal is to reduce the complexity of managing multiple debts and, ideally, save on interest.

Benefits of Debt Consolidation for Married Couples

Debt consolidation offers several advantages for married couples looking to streamline their finances and reduce financial pressure. Here’s a look at the key benefits:

Simplified Financial Management

Managing multiple debts as a couple can be overwhelming, especially when you’re juggling other financial responsibilities like bills, savings, and investments. Consolidating your debts into one loan, and one monthly payment, can make it easier to stay on top of your monthly bills.

A simplified approach to paying off your combined debts can also reduce stress, make it easier to set (and stick to) a household budget, and enable you to work together to achieve your financial goals, whether it’s buying a home, building an emergency fund, or planning for retirement.

Potential for Lower Interest Rates

One of the reasons why many people consolidate debts is to save on interest. This not only saves you money over time but can also help you pay off your debt faster.

When you apply for a debt consolidation loan as a couple, the lender will use your combined income and credit profiles to determine if you qualify and, if so, what your interest rate will be. Applying with your spouse might help you qualify for a lower rate, especially if they have better credit than you. Reducing the overall interest rate on your combined debt can result in significant savings over time.

Recommended: Debt Payoff Guide

Types of Debt Consolidation Loans

There are several types of debt consolidation loans for married couples, each with its own benefits and drawbacks. The right choice will depend on your needs and financial situation.

Personal Loans

A personal loan is one of the most common forms of debt consolidation. These loans are typically unsecured, meaning they do not require collateral like a house or car. With a personal loan, individuals or couples can consolidate various types of debt into one loan with a fixed interest rate and a set repayment term.

A personal loan for debt consolidation can be a smart way to consolidate debt if you qualify for a low interest rate, enough funds to cover your combined debts, and a manageable repayment term. Because these loans are unsecured, your rate and terms will largely depend on your and your partner’s credit profile.

Recommended: How to Use a Personal Loan for Loan Consolidation

Home Equity Loan

If you and your spouse own your home and have built up significant equity, you might consider using a home equity loan to consolidate your debts as a couple. This allows you to borrow against the equity in your home and use the funds to pay off other loans and/or credit card balances.

Home equity is the difference between the appraised value of your home and how much you owe on your mortgage. Depending on the lender, you may be able to borrow up to 85% of the equity you own.

Since home equity loans are secured against the value of your home, lenders can often offer competitive interest rates, usually close to those of first mortgages. However, this type of debt consolidation loan is secured by your home. If you and your spouse are unable to keep up with payments, you could lose your home.

Student Loan Consolidation

In the past, the government allowed married borrowers to combine their federal student loans into one joint consolidation loan, but that program ended in 2006.

Currently, the only way to consolidate federal student loans with a spouse is by using a private lender. With private student loan consolidation or refinancing, you can combine your federal and/or private student loans into a single private student loan at a new interest rate.

If you apply jointly with your spouse, the lender will look at your combined household income and both of your credit scores. If your spouse has better credit or a higher income than you, refinancing with your spouse may allow you to qualify for a lower interest rate than you’d get on your own.

However, not all lenders offer spouse student loan consolidation, which can limit your options. Also keep in mind that refinancing federal loans with a private lender means giving up federal loan benefits and protections, including the ability to enroll in an income-driven repayment plan and eligibility for loan forgiveness programs.

Factors to Consider Before Consolidating Debt

Before committing to a debt consolidation loan as a married couple, it’s important to consider the potential complications and drawbacks of this decision.

Different Money Management Styles

When you take out a debt consolidation loan with your spouse, you’re both on the hook for the payments. So it’s worth thinking about how you handle money as a couple and if you’re okay sharing the debt. Are you both ready to commit to making monthly payments and following a budget together? If managing money together seems challenging, you might want to look into other options like consolidating your debts separately.

Marital Breakdown

If you take out a loan as co-borrowers, you’re both 100% legally responsible for paying it back, even if things don’t work out and you separate. It doesn’t matter if your partner has been paying the loan all along and agrees to continue. If you separate or divorce and that partner stops making payments, the lender will look to you to repay the debt.

Also keep in mind that you can’t remove your name from a joint loan without the lender’s permission. If approval was based on your joint personal loan application, the lender may not be willing to do that. Should your marriage break down, you might end up with payments you can’t afford to make.

Credit Score Impact

Even after you get married, you and your spouse still have separate credit reports. When you apply for a new loan as co-borrowers, the lender will do a hard credit pull on both of your credit reports, which can cause a small temporary dip in your scores. And if either of you misses a payment or falls behind on the loan, it can hurt both your credit scores — even if it’s not your fault.

If you handle repayment responsibly, however, a joint debt consolidation loan for married couples could positively influence your individual credit histories over time.

Irreversible Process

When you consolidate debts with a spouse, the process is permanent. You won’t have the opportunity to revert your former debts back to their original state. Once you use the proceeds of the new loan to pay off your existing loans, those accounts will be closed. This could be problematic if you consolidate federal student loans into a private consolidation loan, since you’ll lose your federal protections like forgiveness and forbearance.

Takeaway

Debt consolidation loans for married couples allow you and your spouse to combine multiple debts into one new loan. This can be an effective way to simplify your financial situation, reduce interest rates, and take control of your debt.

Before you jump in, however, it’s a good idea to discuss how a joint loan will affect your individual credit scores, who will make the payments, and how refinancing will impact your future financial goals.

Considering a personal loan to pay off credit card debt? With low fixed interest rates on loans of $5K to $100K, a SoFi Personal Loan for credit card debt could substantially decrease your monthly bills.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

Can a married couple consolidate their debt into one loan?

Yes, married couples can combine their debts into one loan if they qualify. The process typically involves applying for a personal loan or a home equity loan in both spouses’ names and using it to pay off one or both of their individual debts.

If your spouse has a stronger credit score than you, applying for a consolidation loan together could improve your chances of approval and potentially secure a better interest rate. However, both partners are equally responsible for repaying the loan, so it’s important to ensure that consolidating the debt benefits both parties.

How will debt consolidation affect credit scores?

Debt consolidation can impact credit scores in both positive and negative ways. Initially, applying for a new loan may result in a temporary dip in your credit scores due to a hard inquiry. However, if you use the loan to pay off high-interest credit card debt and make timely payments, it can improve your credit profile over time. Also, having just one payment can reduce the risk of missed payments, further benefiting your credit.

What are the alternatives to debt consolidation loans?

Alternatives to debt consolidation loans include:

•   Balance transfer credit cards: These cards may offer a low or 0% introductory interest rate for transferring existing credit card balances. This can help you save on interest if you are able to pay off the balance within the promotional period. Just be sure any transfer fees don’t negate the savings.

•   Debt snowball or avalanche methods: These strategies focus on paying off smaller debts first (snowball) or debts with the highest interest rates first (avalanche) without consolidating.

•   Debt management plans (DMPs): Offered by credit counseling agencies, DMPs help negotiate lower interest rates and consolidate payments without taking out a new loan.

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Photo credit: iStock/milorad kravic

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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Going for a dip in your own backyard pool can be one of life’s greatest pleasures, but installing one requires a significant financial investment.

To avoid high prices, you might want to go the above-ground pool route. A less-expensive option to in-ground pools, above-ground pools are easier to install. According to HomeAdvisor, the average cost to install an above-ground pool runs between $1,011 and $6,011, with a typical homeowner paying around $3,452. However, the same site reports that if you want an oversized or custom above-ground pool, your total cost may be closer to $11,200.

Don’t have the cash on hand to foot the costs? Here’s a look at different above-ground pool financing options, steps to finance your above-ground pool, and tips to shore up funds for your home improvement project.

Above-Ground Pool Costs

As mentioned, the average cost to install an above-ground pool is $3,452. Swimming pool installation costs depend on a handful of factors:

•   Size: As you might expect, the larger the pool and the higher the wall, the more expensive it is.

•   Shape: The shape of the pool also impacts the price tag. According to HomeAdvisor, rectangular pools are the least costly ($820 to $2,800), followed by round pools ($1,150 to $3,000). Oval pools are the most expensive and can range from $1,290 to $4,840.

•   Material: Above-ground pools can be made of steel, resin, or aluminum. While steel pools are the cheapest, they are also susceptible to corrosion or oxidation. Aluminum pools are the costliest, but they won’t rust. If you’re looking for something in the middle, the resin is rust-resistant and less pricey than aluminum.

Recommended: The Top Home Improvements to Increase Your Home’s Value

Financing Options for Above-Ground Pools

Here are a few above-ground pool financing options to consider:

Personal Loan

A personal loan is also known as a home improvement loan. The major draw of a personal loan is that it can be used for many different kinds of expenses. So if you plan a cluster of home improvement projects to spruce up your place, a personal loan can be used to fund those projects.

Amounts for personal loans typically range from $500 to $100,000, with terms between two and seven years. As of August 2024, the average interest rate for a 24-month personal loan is 12.33%, but you can expect to find rates anywhere from 8% to 36%.

While personal loans can involve a relatively simple online application, lenders will do a hard pull of your credit, which can temporarily ding your credit score. Plus, you’ll need to look out for fees, such as an origination fee, which is an upfront, one-time cost. If you pay off your loan early, some lenders might also hit you with a prepayment penalty to offset any losses in interest.

A personal loan calculator can show you how much your monthly payments can be based on the loan amount, interest rate, and repayment terms.

Home Equity Loan or Line of Credit

As a homeowner, you can borrow against the equity in your home. A home equity loan or home equity line of credit (HELOC) usually features lower interest rates and lower fees than other types of above-ground pool financing. Plus, there are generally lower credit requirements.

A home equity loan is an installment loan in which you receive the proceeds in a lump sum upfront. A HELOC offers a credit limit and allows you to borrow as you go. The interest on a home equity loan or line of credit is tax deductible when used for home improvement projects. Plus, the application process can be simpler. That said, you should be mindful that you risk losing your home if you fall behind on your payments.

Credit Card

The main advantage of using an existing credit card to purchase an above-ground pool and cover installation costs is that you don’t have to apply for a new line of credit or loan. Plus, there is no hard pull on your credit.

The downside: Credit cards usually have higher interest rates and late payment fees. As of August 2024, the average interest rate on credit cards was 23.27%. If you consider putting your above-ground pool on a credit card, you’ll want to pay off the balance as quickly as possible.

In-Store Financing

Another option for above-ground pool loans is in-store financing or directly from the dealer. One plus of getting your pool financed from the store is that the application process can be fairly quick.

However, you’ll want to be watchful for potentially higher interest rates and fees. Plus, there might be limited financing options or no financing available for the pool you’ve had your eye on.

Savings and Cash Payment

If you can pull funds out of your savings and pay for the pool in cash, you won’t have to worry about applying for a line of credit or being responsible for monthly payments. Plus, you won’t have to pay interest, which can ramp up the total cost of your home improvement project.

However, tapping into your savings means less money for other home improvement projects, financial goals, and emergencies. Consider the opportunity cost.

Pros and Cons of Each Financing Method

Let’s look at the advantages and disadvantages of each financing option:

Personal Loan

While getting funding for a personal loan involves a reasonably simple, speedy application process, the interest rates are usually higher than a home equity loan or HELOC. You’ll likely need a higher credit score to qualify for the best interest rates and most flexible terms.

You’ll also want to be aware of fees, such as prepayment penalties, origination fees, and late fees. Depending on the lender and your unique financial situation, various repayment terms may be available.

Home Equity Loan or Line of Credit

Home equity loans and HELOCs typically have lower interest rates than credit cards and personal loans, but you’re betting on your home.

The credit score requirements are normally lower because these are essentially second mortgages secured by your home. The minimum credit score required for home equity loans is usually 680.

Home equity loans usually have fixed interest rates, so you can expect predictable payments throughout the loan’s duration.

HELOCs, on the other hand, have variable interest rates. That, coupled with the fact that you pay as you go, means your monthly payment can change. However, this financing option might be a good fit for multiple home improvement projects or when the amount is likely to change.

If you miss a payment during the draw period, there may be a grace period after the payment due date. You could be charged a late fee or other penalty if you make a payment during this time. However, the lender may not report the late payment to the credit bureaus. If you fail to make a payment after the grace period ends, the lender will likely report it to the credit bureaus, which can hurt your credit score.

Credit Card

A major advantage of a credit card is that you don’t have to apply for a new loan or line of credit. You can use your current credit card to cover the costs of your above-ground pool. Plus, you need to make only minimum payments. On the other hand, you’ll pay a lot in interest if you make only minimum payments.

In-Store Financing

In-store financing can be a convenient, easy-to-apply option. However, repayment terms might be limited, and financing might be available only for certain pools. Also, interest rates might be higher than other options.

Savings and Cash Payment

If you can fork over the money to cover the cost of installing your pool, you don’t have to fret over repayment plans, meeting lending criteria, and paying interest. However, that’s less money you’ll have stashed away for other financial goals.

Recommended: What Are the Different Types of Debt?

Steps to Finance Your Above-Ground Pool

To make for a smoother process and scoop up the best rates and terms on your financing, mind the following steps:

Determine your budget. Do your homework to determine the cost of installing an above-ground pool. This involves looking at models of different sizes, materials, and shapes. You’ll also want to get an estimate for shipping and installation costs.

Build your credit score. The better the score, the more options you’ll likely have, and the less expensive the financing. Practice good credit habits, such as making on-time payments, keeping cards you don’t use open, avoiding overspending, limiting credit applications, and keeping your credit usage low.

Research financing options. Researching the financing options for your pool installation can help you find the best loan for your needs, budget, and situation. See if you can get preapproved online from a few different lenders. That way, you can gauge how much you’ll be approved for before officially applying.

Gather the required documentation. Common documents you’ll need to gather before applying include a government-issued ID, such as a driver’s license or passport, proof of address (i.e., a past utility bill), proof of employment and steady income (i.e., a recent paycheck), your Social Security Number or individual taxpayer identification number (ITIN). Some lenders may ask to see your education history.

Apply. Once you’ve narrowed down your financing choices and lenders, it’s time to submit your application. Make sure you’ve provided all the required information and carefully review it for errors.

Tips for Saving Money on Your Above-Ground Pool

To keep your above-ground pool costs in check, look for financing options with lower interest rates, no or low fees, and flexible terms. Flexible terms help you stay on top of your payments. As with any home project, it also helps to keep track of costs to ensure you’re staying within your budget.

If affordability is at the top of your list, consider pools that are smaller in size, rectangular, and made of less expensive materials. This could potentially also lower your pool’s maintenance and energy costs.

Understanding the Long-Term Costs

Beyond the installation, you’ll want to factor in the ongoing, long-term costs of having a pool. This includes maintenance costs such as cleaning the pool, checking the pH and chlorine levels, and maintaining equipment.

And don’t forget to fold in energy costs and what you’ll need to pay for cleaning supplies such as filters. Generally, chlorine pools will bump up the cost of your overall maintenance, as the upkeep costs more than saltwater counterparts.

Apply for a Home Improvement Loan

Home improvement loans often range between $5,000 to $100,000, and you may be able to get funding on the same business day. You can get a loan from many banks, credit unions, or online lenders and, as mentioned, the funds can be used to pay for just about anything.

The Takeaway

You can go many ways to secure above-ground swimming pool financing. To narrow down the best choice for you, do your homework to figure out exactly the type of pool you’d like and the costs involved.

From there, you can explore your options. It’s important not to take on more debt than necessary. After all, that’s a financial responsibility you’ll be on the hook for. By taking the proper steps, you can figure out the best route for you.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

How much does an above-ground pool cost?

According to HomeAdvisor, the average cost to install an above-ground pool ranges between $1,011 and $6,011, and homeowners spend an average of $3,452. However, larger custom pools that you build from scratch can cost up to $11,200.

What credit score do you need to finance?

The credit score you need for above-ground pool financing depends on the type of financing. Generally, the minimum credit score for a home equity loan or HELOC is 620, but lenders like to see a minimum score of 680. Personal loans are usually more accessible if you have less-than-perfect credit, and the minimum credit score can be as low as 580.

How long do most people finance a pool?

It depends on the type of above-ground pool financing. Personal loan repayment terms range from two to seven years, and if you’re taking out a HELOC, the draw period is usually 10 years.

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Photo credit: iStock/enigma_images

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPL-Q424-001

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Being the cosigner on a loan is a commitment that shouldn’t be taken lightly. It may be tempting to help out a loved one by agreeing to be their financial backup, but you could be putting your own credit reputation in jeopardy if the primary borrower on the loan doesn’t follow through on his or her obligation.

Here’s what you need to know before you sign on that dotted line.

What Is a Cosigner?

If someone isn’t a good candidate for a loan, a lender may allow them to add a better-qualified cosigner to their application. This can help a high-risk borrower improve their chances for getting a loan or better loan terms. Plus, cosigning can help the cosigner and primary borrower build credit.

Essentially, a cosigner agrees to take over financial obligations should the main borrower miss payments or default on the loan. They won’t get the borrowed funds, and if the loan is used to purchase an asset, like a car or home, they won’t be listed as a co-owner. But they are just as responsible as the main borrower for making sure the debt is paid.

This is a different arrangement from using a co-borrower, where that person takes on the loan with the main borrower and has part ownership in whatever the loan buys.

Primary Responsibilities of a Cosigner

What is the responsibility of a cosigner on a loan? Being a cosigner means you’re willing to accept two important roles. Let’s take a closer look at both.

Financial Obligation

It’s important to fully understand your financial obligation before accepting the role of cosigner.
To be clear, you aren’t just serving as a character witness, telling the lender that you trust your friend or loved one will make good on the loan. You’re signing an agreement that says you’ll pay if he or she doesn’t.

This means if the primary borrower is delinquent, you should be ready for the lender to come to you for the missing payment or payments. And if the borrower defaults, the lender may ask you for the balance. You also may have to pay any late fees or collection costs.

If you can’t fulfill your role as cosigner, the lender can use the same methods to collect as it would with a primary borrower, which includes taking you to court.

Credit Risk

Cosigning a loan can have the same effect on your credit as if you applied for and got the loan for yourself.

A lender will likely perform a hard credit inquiry, which can lower your credit score temporarily by just a few points. And the account can show up on your credit reports, just as it does for the main borrower. That means it can potentially impact your credit scores, your future borrowing, and your own financial goals.

Types of Loans That May Require a Cosigner

Although most major credit card issuers don’t accept cosigners, lenders will allow a cosigner on many different types of debt if a borrower’s application needs a boost. Examples include:

•   Student loans

•   Mortgages

•   Leases

•   Auto loans

•   Personal loans

No matter the type of loan, it’s a good idea to consider the potential risks before agreeing to cosign.

Recommended: Personal Loan Guide

Legal Implications of Cosigning

When you’re the cosigner on a loan, you’re signing a contract that outlines your legal obligations and the consequences if you don’t follow through on your commitment. This includes making monthly payments if for some reason the primary borrower won’t or can’t.

In this way, the arrangement is different for a guarantor vs. cosigner: A guarantor is only responsible if the borrower defaults, while a cosigner is responsible if the borrower misses one payment.

It may feel awkward, but as a cosigner, it’s your responsibility to monitor the account and ensure payments are made on time — even if the borrower or the lender doesn’t notify you that there’s a problem.

It’s also important to note that, depending on state law, the lender may decide to sue a cosigner for late payments or even the full amount due before trying to collect from the main borrower. A lender also may take action to collect from a cosigner before moving to take the car, home, or other asset that’s being used as collateral to secure a loan.

Impact on the Cosigner’s Credit

When someone offers to cosign a loan, it’s usually with the intention of helping out a person they care for until that person can establish their own good credit reputation. But if all goes well, the cosigner could benefit, too.

If the main borrower stays on track and makes timely payments, and those favorable account updates appear on the cosigner’s credit reports every month, it could result in a boost to the cosigner’s credit score.

The big drawback, of course, is that any negative information (such as late or missed payments or if the debt goes to collections) can also affect the cosigner’s credit. And even if the main borrower does everything right, becoming a cosigner can affect your debt-to-income (DTI) ratio and your credit utilization. This, in turn, could impact the interest rate or other terms you’re offered if you apply for your own loan or credit card down the road.

Additional Risks of Being a Cosigner

Along with the financial risk and the potential impact on your credit, it’s important to consider the effect cosigning a loan might have on your personal connection with the main borrower. You both may go into the arrangement with the best intentions, but if things go sideways, it could put stress on even the strongest relationship. A serious conversation about your expectations — and theirs — may help.

Remember: Even though you aren’t directly giving that person the funds they need, you are lending him or her your good credit reputation for the length of the loan. And you’ll both have to deal with the fallout if the arrangement doesn’t work out.

Do Cosigners Have Any Rights?

Before you cosign most types of loans, you are entitled to receive a separate disclosure that outlines your rights and obligations. This document, labeled “Notice to Cosigner,” is required under the Federal Trade Commission (FTC) Credit Practices Rule, and it includes warnings about your financial commitment, your credit risk, and potential debt collection methods.

After you cosign, you have the right to ask for updates about the loan’s payment history and outstanding balance at any time.

How to Protect Yourself as a Cosigner

Here are a few steps that could help you safeguard yourself and your relationship with the main borrower before agreeing to cosign on a loan:

•   Talk to the main borrower about their current finances. Are you sure they can cover the monthly loan payments along with their other obligations? Are you clear about what the money will be used for, the total amount being borrowed, and why a cosigner is needed? A personal loan calculator can help you determine what the monthly payments might be, depending on the interest rate and loan term.

•   Ask the main borrower for progress updates. Since it will be your responsibility as a cosigner to ensure payments stay on track, discuss how you can monitor the main borrower’s progress in a way that works for both of you.

•   Ask the lender to keep you in the loop. If you want to receive copies of loan statements, let the lender know. And be sure that you’ll be notified ASAP if there are late or missed payments.

•   Carefully read the “Notice to Cosigner.” This brief document can help you understand your rights and obligations.

•   Get copies of all relevant loan documents. Keep any important paperwork handy so you can refer to it when necessary.

•   Keep an eye on your credit. Your bank, credit card company, or a money tracker app may allow you to check your credit score for free. And you can go to AnnualCreditReport.com to get free credit reports from each of the three major credit bureaus.

Alternatives to Cosigning

If you aren’t comfortable with the risks involved with cosigning, here are some alternatives you may want to consider:

•   Take out the loan yourself and ask your loved one to repay you. Although there’s still a risk that you won’t get all your money back, as long as you stay on track with your loan payments, your credit will stay intact.

•   Fund the loan from your own savings. If you have the means to lend the money directly to your loved one, a family loan can remove credit risk from the borrowing equation. Unfortunately, bypassing the lender also eliminates both the borrower and cosigner’s opportunity to build credit through timely payments. To keep things more formal, and help avoid default risk, you can write up a payment plan and charge interest as part of your agreement.

•   Just say no. If you aren’t comfortable with a cosigning arrangement, it may make sense to follow your gut and turn down the request.

Removing Yourself as Cosigner

Getting your name off a loan you’ve cosigned can be extremely difficult, which is yet another good reason to give the arrangement a lot of thought before you agree to it. Here are some options to explore:

•   Cosigner release: Student loan borrowers may have more luck applying for a cosigner release than other types of borrowers. But even if it’s an option (which you should be sure of before cosigning), the primary borrower still will have to agree to it and meet certain criteria before applying for the release. And the lender will have to approve it, too.

•   Refinancing the loan: With this option, the old loan is paid off and the primary borrower gets a whole new loan that doesn’t require the current cosigner.

•   Paying off the loan: If it’s a secured loan, such as a home or car loan, the borrower could agree to sell the asset and pay off the loan, removing the cosigner from any financial responsibility. If it’s an unsecured loan, and the main borrower or the cosigner has the means to pay it off early, they might decide to do so in order to end the arrangement and move on.

Recommended: Average Personal Loan Interest Rates and What Affects Them

The Takeaway

Agreeing to cosign a loan for a friend or loved one is a generous act. But even in a best-case scenario, it can be a lopsided arrangement, with the cosigner taking on most of the risk and the primary borrower seeing most of the benefits.

If you decide to go forward, it’s important to find a loan that fits the borrower’s budget to improve the chances of their success. As a cosigner, it also can be helpful to monitor payment progress as well as any changes to your own credit score.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

What happens if the primary borrower defaults on the loan?

As a cosigner, you are responsible for making sure the primary borrower’s loan is repaid on time. If the borrower is delinquent or defaults, you can expect the lender to come to you for payment.

Can a cosigner be removed from a loan?

It’s possible but difficult for a cosigner to be removed from a loan. It can be helpful to ask the lender about your options before you agree to cosign.

Does cosigning affect my ability to get my own loans?

Yes. Even in a best-case scenario, where the borrower consistently makes on-time payments, cosigning a loan can affect your credit score, debt-to-income ratio, credit utilization, and other factors that lenders look at when you apply for a loan or credit card.

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Photo credit: iStock/DMP

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPL-Q424-003

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Maybe the asphalt on your driveway is starting to break apart and is more rocky than you’d like. Or perhaps you desire a fresh look and smoother experience going down your driveway.

Whatever the reason, giving your driveway a makeover can add to your home’s overall aesthetic and boost its functionality. Research reveals that 79% of Realtors thought a home’s curb appeal was essential to attracting potential buyers.

That said, driveway paving comes with a hefty price tag. According to estimates from HomeAdvisor, the cost depends on the size and materials, but can be anywhere from $2,000 to $10,000, with $6,000 being the average.

Can you finance a driveway if you don’t have the cash on hand to cover the costs? The good news is yes, it’s entirely possible. In order to figure out the best choice for you, you’ll want to be clued in on your options. Here, we’ll walk you through different ways to pay for a new driveway.

Understanding the Cost of Driveway Paving

Tracking home improvement costs? As mentioned, the average cost of driveway paving is $6,000. The main factors that determine how much you’ll be doling out are the size of your driveway and the type of material you’ll be using. As you might expect, different materials require a different investment of time and labor to install.

For instance, while gravel driveways are the least expensive to install, you’ll need to periodically replenish the gravel — ideally, every few years. On the flip side, driveways made of paved stone have the highest costs initially but can last the longest.

Recommended: Personal Loan Guide

Personal Loans for Driveway Financing

Personal loans can be a relatively easy route to financing a driveway paving. Most personal loan amounts range from a few hundred dollars to up to $50,000, while a few lenders have up to $100,000 available.

The terms of the loan repayment can be anywhere from one to seven years, and the APR, which is typically fixed, ranges between 8% and 36%. As of August 2024, the average interest rate on a 24-month personal loan hovered around 12.33%.

Personal loans usually have lower interest rates than credit cards, but the interest can make for an expensive way to borrow. Plus, there might be upfront fees, such as an origination fee, which is usually anywhere from 1% to 6% of your loan amount, and in some cases as high as 10%. While longer loan terms can mean lower monthly payments, you’ll be paying more interest for the loan.

Some lenders feature preapproval online and can offer a speedy application process that you can also do online. Once you’ve been approved for a personal loan, you may be able to receive the proceeds of the loan as soon as within one business day.

However, you should be aware that a personal loan for home improvement is an installment loan, which means you’ll receive the funds upfront and are responsible for making monthly payments from the start. When you apply, lenders do a hard pull on your credit, negatively impacting your credit score.

Home Equity Loans and HELOCs

If you’re a homeowner, you can borrow against the equity in your home to take out a home equity loan or home equity line of credit (HELOC) to finance a driveway paving. Both are second types of mortgage, so you’re betting against your house. Home equity loans and HELOCs can be good ways to borrow money for a relatively low interest rate and lower fees.

Currently, the average interest rate on a home equity loan is 8.35%, and the average national interest rate on a HELOC is 8.69%.

Like a personal loan, a home equity loan is an installment loan, so you’ll receive the proceeds for the loan in a single lump sum. From there, you’ll have a fixed monthly payment for which you’re on the hook.

A HELOC is a type of revolving loan. Like a credit card, you’ll be approved for a limit and borrow as you need, up to the limit, for the draw period, which usually lasts 10 years. You pay as you go, and might be able to make interest-only payments during the draw period. Because a HELOC lets you borrow funds as needed, it could be a better fit for ongoing or multiple home improvement projects with an undetermined total price tag.

Unlike unsecured forms of credit, home equity loans and HELOCs can be easier to approve. That said, both types of loans require a hard pull of your credit, which may temporarily bring down your credit score by a few points. And because you’re putting up your home as collateral, if you put a halt on your payments, you risk foreclosure and losing your home.

Recommended: The Top Home Improvements to Increase Your Home’s Value

Contractor Financing and Payment Plans

Another option for financing driveway paving is to borrow directly from a contractor. Some contractors partner with a third-party lender that provides financing options. These may include same-as-cash options (which we’ll get to in a bit) or monthly payments that you pay back over the length of the loan.

The pluses of getting financing from a contractor are that it’s convenient and straightforward. The contractor may be able to offer you a flexible plan to meet your needs in financing for driveway paving. The approval process might also be quicker.

However, minuses of contractor financing may include higher interest rates. Plus, you’re tied to the contractor should issues arise during the project.

Credit Cards and Same-as-Cash Options

You can also use a credit card. If you don’t want to jump through the hoops of applying for a new home improvement loan and have a hard pull on your credit, you could use a credit card to finance a new driveway.

That said, credit cards typically have higher interest rates than other types of financing, which ratchet up the costs of your home improvement project. Currently, the average interest rate for credit cards is 21.76%.

Contractors may also offer a “same-as-cash” option. Also known as deferred interest financing, these loans feature a no-interest period, usually between three and six months. However, interest will accrue if you don’t pay off your balance when the promotional period ends. Typical interest rates on “same-as-cash” offers range between 25% to 30%, which makes for an expensive purchase.

If you’re considering the same-as-cash option, you might also want to mull over a zero-balance transfer credit card. Interest also doesn’t accrue on purchases until the end of the promotional period, and these credit cards have zero-interest periods that are up to 20 months, so you could have more time to pay it off.

The Takeaway

Figuring out the best option for financing a driveway improvement means knowing what’s available and weighing the pros and cons of each. Before deciding, estimate how much you anticipate spending on your driveway financing and then pore over your options.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

How much does driveway paving typically cost?

It depends on the size of your driveway and the materials used, but driveway paving typically costs anywhere from $2,000 to $10,000, with an average cost of $6,000.

Can I use a home improvement loan for driveway paving?

You can use a home improvement loan for a driveway paving project. You’ll want to look for a loan with the amount needed plus the lowest terms and flexible rates possible.

Are there government programs for driveway improvement financing?

Government home repair assistance programs exist, and you’ll need to check if you qualify for a home improvement loan. Eligibility criteria may include income, age, location, property type, and if you belong to a specific group.

Further, single-family housing repair loans and grants can be available at the state, county, and city levels. You’ll need to check locally to see what’s out there and how to qualify for a loan or grant to spruce up your home.

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Photo credit: iStock/irina88w

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPL-Q424-005

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