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3 ways to finance a new pool

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Pools can provide a centerpiece for backyard fun and endless summer entertainment. However, pools don’t come cheap; with in-ground pools costing tens of thousands of dollars, many people find paying for the full expense at once difficult. Luckily, there are several financing options available to acquire the necessary funds for a pool.

Borrow against your home equity

There are a few ways to borrow against your equity to finance a pool. With a home equity loan, you use the equity you’ve built in your home to borrow a lump sum of cash. Another way to borrow against your equity is a Home Equity Line of Credit (HELOC), which provides revolving credit—essentially a line of credit you can keep borrowing from over a set period of time up to a certain limit, rather than a lump sum. Both a home equity loan and HELOC allow you to tap into your equity to finance capital improvements.

Keep in mind that borrowing against your home equity leaves you with a second mortgage—your monthly debt payments will increase, and you will be a riskier proposition to lenders, which could complicate future attempts at refinancing your first mortgage. It is also worth noting that these are secured loans. If you manage your borrowing well, you could leverage your home’s value to finance its improvements. However, you can lose your house and pool if you fail to make your payments.

Borrow against another asset

Your home isn’t the only asset you can borrow against. By pledging the value of assets like stocks and mutual funds as collateral, you can take out a securities-based line of credit. If you have a permanent life insurance policy, such as whole life insurance, you can even borrow against the policy’s cash value component. What is whole life insurance? Whole life insurance is a form of life insurance with consistent premiums, a guaranteed death benefit, and a cash value component. The cash value can be used as collateral for loans.

Borrowing against an asset that isn’t your home can be a flexible way to finance expenses and increase your borrowing power, particularly if you purchased your home recently and haven’t accumulated much equity.

Take out a personal loan

It is also possible to take out an unsecured personal loan to finance home improvements. Banks and credit unions will typically look at things like your debt-to-income ratio and credit score to determine your suitability as a borrower. Personal loans are usually disbursed much more quickly than other loans, but you’ll often pay for their convenience with higher interest rates. Some banks market their “pool loans,” even partnering with your local pool installation company, but these loans typically function identically to any other unsecured personal loan.

Thinking through the options

There are multiple ways to furnish the funds for a new pool, including borrowing against your home equity, borrowing against another asset, or taking out a personal loan. If you’re thinking about installing a pool, consider all your options and decide what works best for your financial situation. If it all works out, you can be floating in your own backyard oasis before the end of the summer.

The primary purpose of permanent life insurance is to provide a death benefit.  Loans taken against a life insurance policy can have adverse effects if not managed properly including a reduced death benefit or an unexpected taxable event

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