Adding a shed to your home can mean the difference between rummaging around in a cluttered garage for a tool and having sundry garden tools, outdoor equipment, and off-season lawn furniture all in a designated space. Having a spot to store such items can save time and reduce mental fatigue.
One thing: Sheds can be expensive. According to HomeAdvisor, sheds can cost anywhere from $200 to $30,000 to build, with an average cost of $3,500.
Don’t have the cash on hand to front the costs? Enter shed financing. Here, we’ll walk you through different options for shed financing and alternatives to consider.
Key Points
• Sheds can be costly, with prices ranging from $200 to $30,000, and an average cost of $3,500.
• Financing options include personal loans, contractor financing, savings, family loans, and credit cards.
• Personal loans offer flexibility and can start as low as $500, suitable for small projects.
• Home equity loans or HELOCs are alternatives but come with the risk of losing your home if payments aren’t met.
• Building good credit and getting preapproved can help secure better loan terms and interest rates.
Understanding the Cost of Shed Installation
As mentioned, the average cost to build a shed is $3,500. When installing one of these structures, you’ll need to consider factors like size, building materials, labor costs, and details such as windows, doors, and electrical wiring. As you might expect, designing and building a custom shed is more expensive than constructing one from a premade kit.
Figuring out the cost per square foot can give you a general idea of the total price tag. But to determine the true cost of a shed, you’ll want to do your homework to figure out the cost of materials, labor, and permits.
Personal Loans for Shed Financing
A popular route for shed financing is to take out a personal loan. The beauty of personal loans is their flexibility — the funds can be used for essentially anything. Plus, personal loan amounts often start as low as $500, so they can be a good fit for smaller DIY projects like building a shed.
Payment terms on a personal loan are typically between two and seven years, which can provide some breathing room in your budget. And personal loans tend to have lower interest rates than credit cards. As of August 2024, the national average for interest rates on a 24-month personal loan is 12.33%, while the national average for interest rates on a credit card is 21.76%. (Use a personal loan calculator to figure out what the monthly payments might be, depending on the loan term and interest rate.)
If you know the total cost of the shed, you can use the proceeds from a home improvement loan to cover the different expenses. However, be aware that some lenders charge an origination fee, which can be anywhere from 1% to 5% of the loan amount — and sometimes as high as 10%. This one-time upfront fee is taken from your loan proceeds.
A couple of drawbacks of a personal loan include being responsible for monthly payments, which kick in after you receive the loan proceeds. Plus, lenders will need to do a hard pull of your credit, which can cause your credit score to temporarily dip by a few points.
Recommended: Where to Get a Personal Loan
Contractor Financing and Payment Plans
Besides personal loans, another way to pay for a shed is to get financing directly from the contractor. Some contractors have teamed up with third-party lenders to offer customers a loan option to cover the costs of a home improvement project. Like a personal loan, contractor financing is an installment loan, which means you’re responsible for making monthly payments until the balance is paid off.
While it can be an easy way to get a shed loan, interest rates from contractor financing can be more expensive than other options. Plus, you’re stuck with the contractor if things go south with the project.
Comparing Shed Financing Alternatives
If you’re curious about options besides a personal loan or contractor financing, here are some other ways to finance a shed.
Savings
If you’re not in a rush, you can pause on installing a shed. Instead, figure out how much you’ll need and put money into a savings account. To help you make steady progress in your goals, automate your savings, and figure out a target date and amount.
Family Loans
Family loans are something to consider should you have trusted friends or family who might have the means to give you a loan. As you’ll potentially be mixing personal relations with financial matters, take the time at the outset to discuss any concerns. And just like with any other type of loan, go over the terms and come up with a written plan to pay back the money.
Credit Cards
Tapping into an existing card can be an easy way to finance a shed, but it can also be expensive. Credit card interest rates are usually higher than other types of financing, and if you fall behind on payments, you could get hit with late fees.
Home Equity Loan or HELOC
Have you built up some equity in your home? You may want to consider borrowing against it by taking out a home equity loan or a home equity line of credit (HELOC). Both options are often easier to qualify for than unsecured forms of credit, such as a personal loan or a new credit card. However, if you’re unable to keep up with payments, you risk losing your home.
Tips for Securing an Affordable Shed Loan
Remember, the less you pay in interest and fees, the less expensive the total cost of your shed loan. Here are some steps you can take to help you position yourself for better rates and terms.
Build Your Credit
Having a good or excellent credit score can mean lower interest rates and more flexible terms. To build good credit, stay on top of your monthly payments, keep credit usage low and unused credit cards open, and avoid overspending.
Explore Shed Options
Before applying for a personal loan for a shed, poke around and see the options in terms of size, materials, and details like the door, windows, and shelving. Request estimates to get an idea of the type of shed you’d like to build.
Understand How Much You Need to Borrow
Knowing the type of shed you’d like to build helps you narrow the costs involved. Once you have a ballpark figure, borrow only what’s necessary.
Get Preapproved
If possible, get preapproved for loans from different lenders. That way, you can gauge the loan amount and terms you’ll likely qualify for. Lenders typically allow you to get preapproved online, and the process generally requires a soft credit pull, which won’t impact your credit score.
Recommended: Garage Financing: What Are Your Options?
The Takeaway
While building a shed can be expensive, landing on an affordable way to finance the project is doable. Start by doing your homework on different shed options, and use your findings to determine how much you’ll likely need to borrow. From there, start exploring the financing choices available to you and decide what makes the most sense for your finances.
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 any government programs for shed financing?
Government programs are available, and you might be able to use the proceeds from the loan or grant to finance a shed. However, you’ll need to meet eligibility criteria, which can depend on your income, age, location, type of home improvement project, and whether you belong to certain groups.
How do shed loans compare to other home improvement loans?
Shed loans are the same as other home improvement loans. One main difference is the loan amount. How much you need to borrow depends on several factors, including the shed type, the size, and whether you’re building from scratch or constructing one from a prefabricated kit.
What is the typical repayment period for a shed loan?
Shed loans, which are a type of personal loan, usually have repayment terms of between two and seven years. You’ll want to get a loan term that’s a good fit for your budget and a monthly payment you can afford.
Photo credit: iStock/irina88w
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