How to pay for septic repair or replacement

Septic tanks are important components of many older homes, especially those located in rural or suburban areas. Depending on when you bought your home, you may have to repair or replace your septic tank at least once during your years in your home. 

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In this article, we’ll discuss how to pay for septic repair or replacement and how much a septic system costs. We’ll also discuss ways to save money on septic tank installation and what financing options are available for borrowers.

How much does a septic system cost?

Septic system replacement or repair costs vary depending on the tank’s size, location, and the complexity of the project. On average, installing a septic tank can cost anywhere between $3,500 and $11,500. 

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However, septic system installations that require soil testing, permits, excavations, and restorative landscaping can cost upwards of $20,000. 

How to pay for septic repair or replacement

Homeowners can finance a new septic tank system by leveraging their home equity and exploring different loan options. Here are five financing strategies to consider. 

HELOC

A home equity line of credit (HELOC) is a revolving line of credit that allows homeowners to borrow against the equity in their homes. HELOC borrowers can withdraw funds up to a designated credit limit for a set period, often ten years. 

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Your approved credit limit will depend on your home equity stake, credit score, debt-to-income (DTI) ratio, and income. 

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During the draw period, borrowers make interest-only payments. After the draw period ends, the repayment period begins and borrowers start paying back the loan principal, as well as any remaining interest.

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HELOC interest rates are usually variable. To qualify for a HELOC, borrowers need to have at least 15-20% home equity. HELOC borrowers only pay interest on the amount borrowed during the withdrawal period, not necessarily on the total amount they’re approved for. 

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This offers borrowing flexibility, which can be beneficial for homeowners who know they need a septic tank replacement but aren’t sure how much the entire project will cost. 

Home equity loan

A home equity loan allows homeowners to borrow a lump sum of money against the equity in their homes. Similar to a HELOC, borrowers need a good credit score and 15-20% home equity to qualify. In some cases, it may be possible to get a home equity loan with bad credit.

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Unlike HELOCs, home equity loans provide borrowers with a set amount of money upfront at a fixed interest rate. Borrowers start making monthly payments immediately after funds are disbursed and have loan terms of 5-20 years. 

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Home equity loans make sense for borrowers who prefer predictable monthly payments. This might be best for homeowners who know exactly how much they need to spend on a septic tank replacement and want to start paying down their loan as soon as possible. 

Home equity investment

A home equity investment (HEI) from Point is a uniquely flexible way to tap into your home equity. An HEI provides qualifying borrowers a lump sum of cash in exchange for a percentage of their home’s future appreciation. 

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It’s an attractive financing option for homeowners who don’t want to take on additional debt. Unlike a loan or HELOC, there are no monthly payments associated with an HEI. Instead, repayment is settled when you sell or refinance your home, any time within the 30-year term. 

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To qualify, homeowners need plenty of home equity. However, credit score requirements are more lenient than other solutions, and there are no income checks or DTI limits. HEIs make sense for homeowners who need to access a lump sum of cash, but don’t have a high credit score or the ability (or desire) to make additional monthly payments. 

Septic tank loans

Septic tanks loans are specialized financing options offered by septic tank contractors. These loans are structured similarly to traditional loans in that they come with fixed interest rates and are repaid in monthly installments. However, borrower eligibility differs from one contractor to another. 

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Some contractors might require high credit scores and lower DTIs, while others may have more flexible criteria. Financing a septic system loan through a contractor might make sense for borrowers who don’t have enough home equity to access home equity financing or don’t qualify for traditional loans. 

Personal loan 

Personal loans for home improvement are unsecured loans that provide borrowers with a single lump sum. Unlike home equity products, borrowers don’t need to put up their homes as collateral to secure the loan, and there are no closing costs. Depending on the total cost of the project, this may be a more affordable loan option.  

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However, borrowers do need a good credit score and steady income to qualify. Lenders offer the best rates and terms to those with a great credit history. For those with less-than-great credit, interest rates will be higher. 

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Using a personal loan for a septic tank replacement could make sense if you can afford the higher interest rate, have great credit, and would prefer a fixed interest rate with fixed monthly payments. 

Government grants for septic systems

Several government agencies offer financial assistance to homeowners who need to repair or replace their septic systems.  

U.S. Environmental Protection Agency

The U.S. Environmental Protection Agency (EPA) is a federal agency focused on protecting human and environmental health. One of its key roles is funding projects to improve air and water quality and manage hazardous materials.

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Homeowners can use EPA funds for septic system upgrades through the Clean Water State Revolving Fund (CWSRF), which provides states with resources to offer low-interest loans for water infrastructure projects. Homeowners can contact their state's CWSRF representative to apply for these loans.

U.S. Department of Agriculture

The USDA offers low-interest loans to rural homeowners, including those in areas with populations under 10,000, for septic system upgrades or replacements. Through the Rural Decentralized Water Systems Grant Program (DWS), grants are provided to nonprofits and native tribes, who then offer loans to rural homeowners. Homeowners can’t apply directly for these grants but can secure loans through qualifying organizations at 1% interest for up to 20 years, with a maximum loan amount of $15,000 per household.

Local and state-specific programs

In addition to federal programs, there are also many state-funded and local programs that help homeowners install new septic systems. New York City's Septic System Replacement Fund, for example, offers grants that cover part of the cost of replacing an outdated or malfunctioning septic tank. Reach out to your local health and environmental departments to learn more about funding available near you.

Eligibility criteria for septic system grants

To qualify for septic system grants, homeowners must meet specific conditions set by federal, state, or local governments. While eligibility requirements vary by government entity, homeowners are usually assessed in the following areas:

• Homeowner eligibility: Homeowners are often required to submit documents that verify property ownership, income limits, and reliance on a septic system for waste management. Some programs limit community assistance funds to low-income homeowners. 
• Location and environmental impact: Many government entities prefer or simply require the eligible property to be located in an area where environmental protection is needed. This is usually the case with EPA-funded programs. 
• System requirements and conditions: Most government-funded grants require homeowners to demonstrate a need for a septic system replacement. This can be documented through a septic system diagnosis performed by a technician.

Documents needed to apply for septic system grants

The documents you will need to submit for a septic system grant will depend on the government agency offering the grant. However, homeowners usually need to submit the following paperwork to be considered for a septic system grant:

• Property title or deed
• Proof of income, recent bank statements, and property tax receipts
• Septic system repair or replacement estimates 
• Septic system inspection reports 

Final thoughts on septic tank financing

Although replacing your home’s septic system can be expensive and unexpected, there are many ways to cover the cost. Government-funded loan programs, grant programs, home equity financing, and contractor loans are just some of the ways you can access septic system funds. Be sure to weigh out the pros and cons of each financing option and consider your eligibility before making a final decision. 

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Get septic tank financing through a Home Equity Investment from Point. Borrowers don’t need to make monthly payments or go through excessive credit evaluations. Explore Point’s HEIs here.