If your home isn’t connected to a local sewer system, a septic tank is a must-have. But setting up a new septic system, or replacing an old one, can be a pricey endeavor.
Fortunately, there are a few different payment options available to help homeowners cover the costs of installing this essential piece of equipment.
In this guide, we’ll explore the various sources you might choose to fund your septic system project, and some of the pros and cons of each.
Key Points
• The average septic system installation costs $8,000 but can exceed $20,000.
• Personal loans offer quick funding for septic system projects, with flexible terms and no collateral required for qualifying borrowers.
• Home equity loans and HELOCs provide financing options with lower interest rates, but require sufficient home equity and involve closing costs.
• Government programs offer grants and low-interest loans for septic system costs, but eligibility criteria apply.
• Contractor financing and payment plans may be available, offering convenience for those who prefer to finance through their septic tank company.
Septic System Costs
Most homeowners in the U.S. pay from $3,615 to $12,406 for a septic system installation, according to the home improvement site Angi. The average cost comes out to about $8,000. But prices can vary significantly depending on the size and type of tank you choose, the materials used, labor, and other factors — and costs could go over $20,000.
If you’re a die-hard DIYer who’s considering tackling this project with the help of some YouTube videos, you may want to think again. This is a big and dirty job that’s probably best left to professionals with the experience and machinery to get it done right. So let’s take a look at some ways you can pay for the work and stay clear of the mess and stress.
Recommended: The Ultimate House Maintenance Checklist
Personal Loans for Septic System Financing
If you need to finance your project in a hurry (and with a septic system repair, that’s often the case), you may want to consider a personal loan.
With personal loans, it’s possible you could receive your money on the same day you apply, or at most within a few business days. You also may have some flexibility in when the funds arrive and how long you have to pay back the money.
Personal loan repayment terms typically range from two to seven years, but they vary by lender. The amount you can borrow and the interest rate you’ll pay with home improvement loans are generally based on a few different factors, including your credit score. Typically, the better your credit, the lower the interest rate.
Generally speaking, qualifying borrowers with a strong credit history and high income may be able to secure a loan of up to $100,000 without having to provide some type of collateral. This type of home improvement loan usually has a fixed interest rate, so you can know exactly what your monthly payments will be.
Home Equity Loans and HELOCs
Another potential way to finance a septic system project is to tap your home equity and apply for a home equity loan or home equity line of credit (HELOC).
If you qualify for a home equity loan for your septic system, you’ll receive a lump-sum amount that you’ll repay in equal monthly installments, much like a personal loan.
A home equity line of credit (HELOC), on the other hand, works more like a credit card. The interest rate usually isn’t fixed with a HELOC, and neither is the payment amount. As you repay the money you’ve borrowed, you can use it again — up to a predetermined limit.
Because both home equity loans and HELOCs are secured with your home as collateral (which means the lender can foreclose if you fail to make your payments), the interest rates are generally lower than with unsecured personal loans. But it’s worth noting that you typically have to have at least 15% to 20% equity in your home to qualify, it can take longer to get your money, and you can expect to pay closing costs with this type of financing.
Government Programs and Grants
If you meet certain criteria, you may be able to get help with funding through federal or state assistance programs. Here are a few options you may want to research:
• The Environmental Protection Agency (EPA) Clean Water State Revolving Fund provides grants to all 50 states and Puerto Rico so that qualifying residents can receive low-interest loans to install, upgrade, or maintain their septic systems.
• The U.S. Department of Agriculture (USDA) offers both loans and grants that can benefit low-income homeowners who need help with their septic system costs.
• The Department of Housing and Urban Development (HUD) provides community block grants to help eligible homeowners repair, install, or improve their residential septic system.
• Some states also offer tax credits or deductions to residents who repair or replace a septic system. (You may want to check with your state government or local tax professional first to see what’s available and if you qualify.)
Contractor Financing and Payment Plans
It’s possible the septic tank company you’re considering has teamed up with a lender in order to offer its own financing plan to potential customers.
The salesperson or contractor will likely take you through each step of how the company’s septic tank financing works and may even offer a financial incentive if you sign up. Just remember that a contractor isn’t obligated to find you the best payment solution when it comes to how to pay for septic repair. So it’s important to review and understand the terms of any offer you receive, and to compare the contractor’s offer with other options available.
Recommended: How Much Does a Home Inspection Cost?
Comparing Septic System Financing Options
Hopefully, you’ll have time to do some comparison shopping as you consider the various financing methods for your septic system project. Here are some things to keep in mind as you do your research:
• What monthly payment works for your budget? A longer loan term generally means lower monthly payments. Keep your budget in mind as you choose how much time you’ll need to pay back your septic tank installation financing.
• How’s your credit? Good credit can often get you a better interest rate and other loan terms. If you aren’t sure where your credit stands, you may want to check out your latest credit report and/or credit score and dispute any errors you see.
• What’s in the contract? Understanding the terms you’re being offered for a septic tank loan can keep you from running into trouble down the road. For example, if a contractor or credit card company offers you a low introductory interest rate, it’s important to ensure you’ll have enough time to pay off your purchase before the interest rate goes up.
• Are there fees? Remember, fees can add to the overall cost of your loan. Some lenders may charge origination, application, and other loan fees. And you can expect to pay for a home appraisal and other closing costs if you get a home equity loan or HELOC.
• How fast can you get the money? If you don’t have enough cash stashed away for your project, applying for a personal loan may be the quickest way to finance the work. Some personal loan lenders can get you your money on the same day you’re approved. Contractor financing also may offer a convenient and fast approval process.
The Takeaway
Hiring a company to install or replace your septic system can be expensive, and the DIY route isn’t a great alternative for most people. You may be able to cut some of your costs if you can qualify for a government-funded grant or low-interest loan. But these financing options aren’t available to everyone, and it can take time to go through the application and approval process.
Some people find it makes sense to tap their home equity to get the money. Or they may find their contractor’s customer financing a convenient solution. However, if you’re in a hurry to get the work done — and you have good enough credit to score a low interest rate — a type of home improvement loan may make the most sense 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.
FAQ>
Are there tax deductions for septic system installation or repair?
A new septic system doesn’t qualify for any of the tax credits the IRS currently allows for home improvements. But some states offer tax credits or deductions to homeowners who replace or repair a septic system. A tax professional in your area can help you check for potential tax savings.
Can I finance both installation and ongoing maintenance of my septic system?
It’s a good idea to make septic tank maintenance costs a part of your household budget, but those expenses likely won’t be included in the amount you borrow to pay for a new system.
Are there special financing options for rural homeowners?
Yes. The USDA’s Rural Decentralized Water Systems Grant Program helps qualified nonprofits fund loans to increase access to clean and reliable septic systems for households in eligible rural areas.
Photo credit: iStock/Kwangmoozaa
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-Q424-006