What Are the Different Types of Pool Loans?

Building or even renovating a swimming pool is not cheap. That’s why many pool owners opt to finance their swimming pools by taking up a pool loan. If you’re interested to know more about pool loans, you’re in the right place. Let’s start by talking about what exactly pool loans are. 

What is a Pool Loan? 

A pool loan is a type of personal loan offered by banks and other financial institutions to borrowers to help them build or renovate their pools. This type of loan can also be considered as a home improvement loan as swimming pools can help increase the value of your property. 

There are different types of pool loans and knowing what these types are can help you make a better decision before deciding it’s a done deal. Let’s start with the most common type of pool loan. 

1. Secured Pool Loan

In a nutshell, a secured pool loan is a type of loan backed by a collateral asset. You back the borrowed amount with a financial asset, typically of the same value as the money you’ve loaned. This allows the lender to collect the collateral asset should you fail to make payments. The collateral asset collected is often sold to make up for the lender’s lost investment. 

Secured pool loans are one of the most common types of loans as it gives the lender a sense of security that the borrower will keep up with their payment terms. If your application gets approved, you can enjoy some of the benefits of this type of pool loan. The collateral asset you use gives you some sort of leverage allowing you to get lower interest rates and longer payment terms which makes secured pool loans a more flexible type of loan. Depending on your financial capacity, you can opt to pay off your pool loan in as fast as 12 months or you can stretch out the payment terms to 15 years. 

There are also some downsides to taking up a secured pool loan. If you default, you will not only risk losing the collateral asset you’ve put up, but you could incur more charges if the collateral asset does not meet the total owed amount. In this case, the lender will levy additional charges to the borrower to cover the total owed amount. Moreover, the lender’s collection or repossession of the collateral asset can stay in your credit report for as long as seven years. 

Overall, secured pool loans are a great place to start because of its flexible payment terms and lower interest rates. You can apply for secured pool loans from banks and other financial institutions. 

2. Unsecured Pool Loan

Quite the opposite of secured pool loans, an unsecured pool loan is a type of personal loan that does not require any form of collateral asset. Instead of relying on collateral assets, a lender allows the borrower to borrow money based on their creditworthiness. On that note, having a good credit standing is important when applying for an unsecured pool loan. 

Obviously, the benefit of taking up an unsecured pool loan is that you’re not running the risk of losing any of your financial assets as the borrower will not require you to pledge any collateral. Using only your good credit score, unsecured pool loans can grant you additional funds to complete your pool project. 

However, the disadvantages of taking up an unsecured pool loan might outweigh its potential benefits. Because the money loaned by lenders to borrowers is not secured by any form of financial asset, unsecured pool loans will typically have higher interest rates which makes it so that you get higher monthly payment terms for using the lender’s financial assets. In addition, lenders would also want to have their money back sooner, which gives borrowers shorter payment terms compared to secured pool loans. You may not have pledged any collateral that could be repossessed or collected should you default from your payment, but the lender can send a collection agency to collect the debt, and in some cases, take the borrower to court. 

Unsecured pool loans are a good option as long as you can keep up with your payments. These types of pool loans are typically offered by credit unions and financing companies. 

3. In-House Pool Financing

In-house pool financing is a type of pool loan you get from pool companies and pool contractors. They usually partner with financial institutions or they may use their own funds to help their clients fund their pool projects. 

There are several notable advantages to taking up a pool loan through your contractor. One of which is that the approval rating is typically higher compared to both secured and unsecured pool loans because your contractor can help you with the necessary requirements during the application process. You won’t have to be concerned about credit scores and collaterals as the pool contractor can mediate and even vouch for you to help you land the loan. Furthermore, you won’t have to deal with different agents as you will only have to talk to your pool contractor, especially if they’re using their own funds to help you cover the costs of your pool project. This makes taking up the loan more convenient for pool owners. Because pool contractors and pool companies might not have dedicated representatives to talk to their clients about the terms of pool financing, they will put up pool financing calculators on their websites which can make calculating the monthly costs of paying up the loan simpler and more straightforward making them more appealing to pool owners. 

In-house pool financing does not come with its drawbacks. Pool contractor-arranged loans can be limited. They can have predetermined payment terms and you will be restricted to the financial companies they’ve partnered with compared to scouting for a pool loan on your own. Obviously, in-house pool loans are offered by pool contractors like Stanton Pools, so be sure to look for a contractor that provides these kinds of services if you’re interested in taking up in-house pool loans. 

4. HELOC

Short for home equity lines of credit, HELOCs can be another source of financial funds when you want to finance your next pool project. More like a credit card than an actual loan, HELOCs allow you to borrow money against the equity of your home. The lender will typically start you off with a credit limit that falls around 85% to 60% of your total home equity. And while the assessed value of your home may be a vital factor, the lender will also consider your creditworthiness. 

Because these funds are secured against the value of your home equity, approval of these types of loans are typically faster and they come with lower interest rates. 

5. 410(k) Account

If you don’t qualify or if you don’t feel comfortable borrowing money from or against the aforementioned types of pool loan, you can always check from other sources, and one of them is your 410(k) account. A 410(k) account is a company-sponsored retirement account that employees can make use of. Many homeowners feel more comfortable using their 410(k) accounts because they’re basically borrowing money from their own retirement account, so there’s no third party involved with the lending of the funds. 

The amount of money you can loan is limited to the funds you have in your account and must be paid in five years. The good thing about borrowing against your 410(k) account is that the consequences of not making payment is less severe than the aforementioned loan options. If you fail to make payment within the five-year time frame, you will be subjected to a 10% early withdrawal penalty. It’s also common for many pool owners to pay for the base costs of building or remodeling their pools with cash and use their 410(k) accounts to pay for the remainder of the costs. It’s not unusual that pool owners only finance a part of the overall costs of their pool project which makes drawing from their retirement accounts an ideal choice. 

Final Words 

So, that’s it. Some of the most common types of pool loans that are used by many homeowners in America. You can use the information from this article to help you make a better decision when taking up a loan for your swimming pool. 

Remember to always be mindful of the details and always ask the representative you’ve talked to to put the details in writing if possible. They can give you a hard copy and/or a soft copy of the terms so you can refer to it and reflect on it before you sign the contract. There are also other sources of funds like peer to peer lenders so make sure to check them all. We hope that this article has been helpful, and as always, happy swimming!