Pool loans: Understanding your options

Few things are better than enjoying a crisp dip in your own swimming pool on a hot summer day. Pools also have numerous other benefits, too, such as opening new fitness avenues, offering a gathering place for friends and family, and even boosting your home value in many areas of the country. 

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Depending on the type of pool you’re hoping to buy, the cost can be quite substantial. Fortunately, there are many options for affordable swimming pool loans without having to resort to high-interest credit cards. We’ll cover the ins and outs of each one. 

The cost of adding a pool

A good first step is figuring out what type of pool you want because this will dictate your purchase and installation costs. Here are the average costs for different pool types:

• Hot tub: $2,000 - $11,000
• Swim spa: $20,000 - $40,000
• In-ground pool: $44,363 - $86,883
• Above-ground pool: $1,011 - $6,016

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These estimates can give you a rough idea, but many factors can bump the costs of your own home improvement project up or down, such as local labor costs, luxury features, construction methods, etc. Don’t forget to include other related costs, too, such as installing a fence for safety around the pool perimeter. 

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Once you’re sure what type of pool you want, it’s a good idea to get a more firm cost estimate from contractors. This can help you ensure you’re able to afford the monthly payments, as well as what type of pool loans would work best. 

5 ways to finance a pool

There are many different types of pool loans available, each with its pros and cons. 

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In addition, many pool dealerships offer various types of loan funding options with a quick and easy application process, although your overall costs may be higher. To get the lowest rates, it’s best to shop around on your own, too, so you can identify the best lender and home improvement loan type for your needs. 

Personal loans

• Term lengths: 1 to 5 years.
• Loan amounts: $100 to $100,000.
• Requirements: 580+ credit score and a debt-to-income ratio under 36%.

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Personal loans are often the fastest loan option, with some lenders disbursing funds as soon as the next business day or even the same day you apply. They’re not backed by any collateral, so the interest rates tend to be a bit higher, and approval depends more on your income and credit history than other loan types. However, you’ll pay a fixed rate for the entirety of your loan term, which makes budgeting easy. Personal loans are available in a wide range of loan amounts. 

Home equity loan

• Term lengths: 1 to 20 years.
• Loan amounts: Up to 80% of your home’s value minus your mortgage balance.
• Requirements: 620+ credit score and a debt-to-income ratio under 43%.

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Home equity loans function similarly to personal loans, with fixed interest rates and lump-sum funding. The main difference is that it’s tied to your home as collateral, meaning you’ll need to go through the full underwriting process for a second mortgage. This can take up to six weeks and cost up to 5% in closing fees. In return, you’ll get much lower interest rates that make for lower ongoing monthly payments. 

Home equity line of credit

• Term lengths: A 5 to 10-year draw period, followed by a 10 to 20-year repayment period.
• Loan amounts: Up to 80% of your home’s value minus your mortgage balance.
• Requirements: 620+ credit score and a debt-to-income ratio under 43%.

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Home equity lines of credit (HELOCs), in turn, function similarly to home equity loans, except that they’re structured as a two-phase line of credit. During the first phase, you have the option of borrowing money up to your credit limit while making interest-only minimum payments. Your access to new funds stops when it switches to the second phase, where you’ll make full principal and interest payments similar to any other loan. 

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This funding style is more flexible, but you’ll need more wiggle room in your budget to handle the shifting payment amounts over time, especially since they come with variable interest rates that can also affect your payment amount. 

Cash-out refinance

• Term lengths: Up to 30 years.
• Loan amounts: Up to 80% of your home’s value, including the lump sum of cash.
• Requirements: 620+ credit score and a debt-to-income ratio under 50%.

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Many lenders allow you to refinance your primary mortgage and take out additional funds in the process, resulting in a larger loan balance. This can be a good option if you can get a better rate on your mortgage, and it allows you to spread out your pool financing repayment over your full mortgage term length, lowering your monthly costs (but increasing the amount of interest you pay overall).

Home equity investment

• Term lengths: Up to 30 years.
• Loan amounts: $25,000 to $500,000. 
• Requirements: 500+ credit score and a home worth more than $155,000 in an eligible lending area. 

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Home equity investments (HEIs) allow access to a lump sum of funds, but rather than paying it back each month, it’ll be due in 30 years as a single payment — meaning no regular monthly payments in the meantime. Instead of paying financing charges in the form of interest, you’ll pay a share of your home’s appreciation in value. For example, if your home is worth $100,000 more in 30 years, you’ll pay a pre-set fraction of this amount, not your total home value. 

Frequently asked questions

What is the average interest rate for a pool loan?

The APR may differ based on the loan type, your lender, your term length, etc. In the second quarter of 2024, for example, banks were charging an average interest rate of 11.79% on a three-year personal loan, versus 7.13% for a five-year home equity loan from a credit union. 

What are typical pool financing terms?

There aren’t any typical pool loan financing terms since a “pool loan” isn’t a specific product. People use a wide range of financing options to pay for swimming pools. Home equity investments, for example, require no monthly payments until a single payment any time during a 30-year term length, while personal loans can sometimes be fully repaid with monthly installments in under a year. 

What credit score do you need for a pool loan?

You’ll typically need a credit score of at least 500 to qualify, although most types of pool loans require a minimum credit score of 620 or higher. 

Final thoughts

The biggest decision most homeowners need to make when considering which pool loan is right for them is whether they want a secured financing option or not. Secured financing is often cheaper in the long run, but because it’s tied to your home, your lender can foreclose on your home if you default. You may be able to deduct the interest you pay for certain home equity financing loans on your tax return, however. 

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It’s worth taking some time to consider each of these options in depth. Think about how your payments will fit into your budget in the future, how stable your income will be, and how much risk you want to take in order to save money with a lower rate. Homeowners who are confident they’ve found the right pool loan can watch their stress float away while buoying up their home’s value.

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