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How Does HVAC Financing Work?
When your heating or cooling system breaks down, the financial burden of replacing it can feel overwhelming. Unless you have dedicated savings set aside for home appliance repair and replacement, consider exploring HVAC financing options to manage this significant expense.
What is HVAC Financing?
Financing for HVAC replacement is an alternative to upfront payments. It involves taking out a loan from a bank or credit union and repaying it over time with interest-based payments.
In this article, we will review the various financing options available for air conditioner, furnace, or complete system replacement so you can determine the best solution for your financial situation.
Factors to Consider When Choosing HVAC Financing
- Credit Score
Your credit rating significantly impacts which financing options are available to you and on what terms. While some financing programs require good to excellent credit scores, others offer solutions for homeowners with less-than-perfect or newer credit histories.
- Interest Rates
The financial implications of HVAC financing depend heavily on interest rates. Before signing any agreement, carefully review all payment requirements, interest rate options, loan duration, and other conditions to ensure you fully understand the financial commitment.
- Total Cost of System
Always get a written contract that details every expense associated with your new system. Your agreement should outline equipment costs, labor charges, disposal fees, and any additional expense related to HVAC installation.
- Long-term Savings (Credits, Rebates, & Promotions)
When investing in a new heating and cooling system, consider the available tax incentives and rebates that can offset your costs. The U.S. government offers tax credits for energy-efficient HVAC systems. Additionally, many utility companies, manufacturers, and retailers offer seasonal promotions and additional savings opportunities.
How Much Does a New HVAC System Cost?
Basic systems usually start around $5,000, while energy-efficient systems for larger homes can exceed $15,000. Installation costs typically account for a significant portion of the total expense, with additional costs potentially arising from ductwork modifications or electrical upgrades.
The price of a new HVAC system varies depending on several factors, including:
- The size of your home
- System type
- Efficiency rating
- Installation complexity
Financing Options for New HVAC System Replacement
When investing in a new furnace or air conditioning system, several HVAC financing options can help make this major purchase more manageable for your budget. Understanding the advantages and potential pitfalls of each option will help you choose the most suitable financing method for your situation.
Personal Loan
A personal loan through your bank, credit union, or online lender offers a straightforward way to finance your HVAC system without using your home as collateral. Interest rates and terms vary based on your location, existing relationship with the lender, loan amount, and credit score, making it essential to shop around for the most competitive offers.
Things to Consider:
- Personal loans often carry higher interest rates compared to secured loans, and lenders may impose limits on how much you can borrow.
- Look out for extra fees, prepayment penalties that charge you for paying off your loan early, and unfavorable repayment terms.
- While longer terms reduce monthly payments, they significantly increase the total interest paid over the life of the loan.
Home Equity Loan
As a homeowner with built-up equity (typically requiring at least 15%), you can leverage a home equity loan — essentially a second mortgage — to finance your HVAC system. These loans typically offer lower interest rates than personal loans because your property secures them. They generally come with fixed interest rates that provide payment stability.
Things to Consider:
- Compare interest rates and terms across multiple lenders, as substantial variations exist in the market.
- Beware that a high debt-to-income ratio may disqualify you from securing favorable terms or any loan at all.
- Factor in closing costs and additional fees when calculating the total expense, and remember that defaulting on payments puts your home at risk of foreclosure.
Home Equity Line of Credit (HELOC)
Similar to a home equity loan, a HELOC uses your home as collateral but functions more like a credit card with a revolving line of credit. This flexibility allows you to borrow only what you need for your HVAC system, then pay it down and borrow again during the draw period (typically 10 years), followed by a repayment period (usually 20 years).
Things to Consider:
- HELOCs typically feature variable interest rates, meaning your payments could increase if market rates rise.
- In the event of a housing market downturn, you could find yourself owing more than your home's value.
- As with home equity loans, defaulting on HELOC payments puts your home at risk of foreclosure, making this option best suited for homeowners with substantial equity and a stable income.
0% Interest Credit Card
For consumers with good to excellent credit scores (690 or higher), zero-interest promotional credit cards offer an attractive option for financing HVAC replacement. These cards typically offer 15-21 months of interest-free financing, potentially eliminating financing costs if managed properly.
HVAC Financing Through an HVAC Company
Many HVAC contractors partner with third-party lenders like GreenSky® to offer convenient HVAC financing options directly at the point of sale. HVAC financing is available with varying interest rates and terms, depending on the contractor and your financial situation.
Combining your installation and payment plan through your HVAC contractor can streamline the process, making it a convenient option when the terms align with your financial needs.
Ready to Financing Your New HVAC System? Let's Talk!
Thinking about new HVAC financing? A brand-new heating and cooling system from Eck Services will be professionally and affordably installed to meet your home's comfort needs and keep your monthly budget in check.
As a Lennox Premier Dealer and GreenSky® partner, Eck Services makes quality home comfort solutions affordable for homeowners across South Central Kansas. Learn more about our convenient HVAC financing and get approved quickly. After qualifying for credit, you'll unlock monthly payments, reasonable interest rates, and flexible terms. We make it easy to invest in new HVAC systems and emergency services, with payments spread out over an extended period.
