Investing in a new HVAC system can be a daunting process, given its extensive impact on your entire home. The costs involved may appear considerable, rendering it seemingly beyond the means of many people.
However, it doesn’t have to be this way. There are actually quite a few options for financing to fit different budgets and different personal circumstances. Once you have a firm grasp on your existing finances and how much you will be able to pay in the future, you should be able to find an option that suits you.
This article will explore several different financing sources for HVAC systems.
Asses Your HVAC Needs
The first thing that you will need to do is make an assessment of your current HVAC needs. Take a look at your system to see what condition it is in, and think about whether you will need an entirely new system.
As HVAC systems can cost several thousand dollars, you should figure out how much you would be able to pay on a monthly basis towards financing a new system.
Understand Your Credit
You will need to know what your credit score is, as many forms of financing are dependent upon having good credit. A good credit score is considered to be 713 or more. However, some lenders may be willing to work with homeowners with credit scores as low as 500. The lower your score is, though, the more stringent the loan conditions will be.
Explore Financing Options
Once you’ve gotten a firm grasp on your monthly finances and know what kinds of regular payments you will be able to make, you can start exploring different financing options.
Among the options that you can consider are the following:
Your Existing Home Insurance Policy
Some policies actually cover repairs to HVAC systems if the damage is due to a natural disaster. However, if the damage is the result of the wear and tear that takes place over time, you will probably not be covered for it. In any case, you should take into consideration the reasons for your upgrade and look through your policy carefully.
Using a Credit Card
Using a standard credit card could be an option for you. As mentioned above, though, you should be sure that you will be able to make payments in a timely manner. Otherwise, you will not only see your interest increase, but your credit score will go downhill as a result.
The best thing to do if you choose this option is to look for a credit card with a low APR. It might also be possible to get an upgrade to an existing credit card specifically for the purpose of doing home renovations.
If you qualify, contractor financing can be a reliable way to receive financing either through installment loans, lines of credit, personal loans, or a range of other options. Explore HVAC financing options from contractors to discover the available opportunities.
In addition to the range of funding options available, contractors offering financing also work with a larger network of lenders. These lenders may be willing to extend financing to credit-challenged homeowners, increasing the likelihood you find financing.
Finally, contractor financing often comes with lower interest rates and promotional periods during which APR is waived.
FHA 203K Loans
The Federal Housing Administration has a category of loans specifically for low-income people that can be used both for buying a house and for different types of home improvement loans. HVAC upgrades fall into this category of loans.
FHA 203K loans have very specific requirements. You must have a minimum credit score of at least 500. The minimum down payment required when you first receive your loan will be proportional to your credit score. For example, if you have a score of 580 or above, you will have to pay 3.5% of the cost as a down payment.
If your score is lower than this, you will have to pay substantially more as a down payment. Read the requirements carefully before you apply.
Prepare Your Documentation
To increase the chances for approval, you must provide proof of your net income (not gross, as lenders are not concerned with your salary before taxes). Your income is the strongest statement of your ability to make payments.
You should also have evidence that a comprehensive check has been performed by a licensed service technician. This includes checks for signs of leaks, any kind of electrical problems, and an assessment of how well your thermostat is functioning. If you can provide sufficient proof that you need a full-scale upgrade, it will make your application process easier.
Strengthen Your Application
One of the reasons that you might be refused funding could be if your credit score is too low. If this is the case, you can raise your credit score before you apply to increase your chances of approval. Increasing your credit score takes time, but you can start by paying off existing debts in a timely manner.
Another thing that you can do is get a co-signer. If you can find someone to cosign with you, it could improve your chances of being approved. The co-signer would have to be someone who has a strong credit score.
In the case that you are unable to make a payment, the cosigner will be asked to pay for you. If you choose to go this route, though, be sure to find someone who is trustworthy and who you know will follow through if necessary.
Wait for Approval
Once you submit all of the materials for your application, you will have to wait for approval. If you have submitted all of the necessary documents, you should receive an answer within a few days. Larger loans – those over $20,000 – might take significantly longer as lenders will want to do a more thorough background check on you.
If you leave something out of your application, the process will be delayed until you complete it.
If you’ve been approved, take a look at the terms of the financing agreement that your lender has given you. Be sure that they are ones that you can successfully meet on the required basis.
If not, you should probably look elsewhere for something more suitable. If you accept an offer that you will fail to comply with, it could eventually spell disaster for your credit rating, and you may well find yourself facing a big pile of unwanted interest.
Getting a new HVAC system can be a major undertaking. Take the time to go through the process step-by-step and consider all of your financing options. HVAC upgrades aren’t off the table just because you don’t have the funds upfront or a low credit score. Many options are still available to you.