How to Finance an HVAC

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• Homeowners can tap into several funding solutions to cover an HVAC system.
• Popular funding solutions include personal loans, home equity loans, HELOCs, and credit cards.
• The right fit varies based on your available home equity, preferences, and financial situation.

A home HVAC system is key for creating a comfortable, healthy living environment. In areas where excessive heat or cold are common, it can even be dangerous to not have a properly working one.

If your old HVAC system is failing or has already broken down and needs replacement, you may suffer some sticker shock when you see how much it’s going to cost. However, there are ways to finance this expense if you don’t have enough cash to cover it.

How much does an HVAC cost?

The average cost to replace an HVAC is $7,500, according to the home services website Angi, with individual costs ranging from $5,000 to as much as $12,500.  

If you have cash readily available in an emergency fund, then you might be able to avoid financing this purchase. But if you don’t have the cash on hand, financing the job gives you the opportunity to get the unit installed as soon as possible.

How to finance an HVAC 

If you need to finance an HVAC, the good news is that you have several funding options available. The right funding solution for you varies based on your unique situation. Here’s a quick look at some of your options:

• Personal loan: A personal loan offers fixed monthly payments. In most cases, you won’t have to put down collateral to borrow the funds you need to pay for your HVAC. 
• Home equity loan: A home equity loan for an HVAC allows homeowners with significant equity to tap into that value. Lenders use your home as collateral, which makes this a second mortgage. 
• Home equity line of credit (HELOC): HELOCs allow you to tap into your home equity as needs such as paying for an HVAC arise. Unlike a home equity loan, the monthly payment can vary over time. 
• Credit card: Credit cards offer a convenient way to finance an HVAC. But the relatively high interest rates can make this a more expensive option. 

Finance your HVAC with a personal loan

You can use a personal loan to pay for almost anything, including your heating and air-conditioning system. Personal loans involve a fixed interest and set monthly payments for the entire loan term. Typically, lenders offer relatively fast access to cash through personal loans. 

“Personal loans usually offer flexible repayment terms, allowing you to choose a loan duration that suits your financial situation,” says Baruch Silvermann, CEO of The Smart Investor. “You can select a shorter term to pay off the loan quickly or a longer term for lower monthly payments.”

If you are looking for a way to slide this major purchase into your budget, the fixed monthly payments of a personal loan can be appealing. 

Another benefit is that you won’t have to use your home as collateral. With that, the lender won’t be able to come after your home if you miss a payment. The catch is that interest rates on personal loans tend to be higher than secured loan options, like home equity loans and HELOCs. 

If you want to move forward with a personal loan, start by comparing your loan options from multiple lenders. You can often find wildly different interest rates by taking the time to shop around.

Next step: See Insider’s picks for the best home improvement loans >>

HVAC financing with a home equity loan

A home equity loan is an option for homeowners with significant equity in their house. In general, you won’t be able to borrow more than 85% of the amount of home equity you have. Essentially, this secured loan option involves putting your home on the line by taking out a second mortgage. 

You’ll get a lump sum amount of cash up front. Immediately after that, you’ll start making fixed monthly payments for the loan term. Like personal loans, this set monthly payment can make budgeting easier. 

With your home as collateral, you can often find lower interest rate opportunities than other financing solutions. Although the lower interest rates are undeniably attractive, home equity loans come with the risk of losing your home. If you don’t keep up with the payments, it could lead to foreclosure. 

In addition to the heightened risk, home equity-based borrowing tends to take longer for approval than unsecured loan options. The reason is that many lenders will want to see an appraisal on the value of your home before finalizing your home equity loan.

Next step: See Insider’s picks for the best home equity loans >>

Home equity line of credit for HVAC financing

Like a home equity loan, HELOCs involve using your home equity as collateral. But unlike a home equity loan, a HELOC gives you access to a line of credit with a variable interest rate for an extended period of time. 

“HELOCs offer a revolving line of credit, allowing homeowners to borrow as needed during the draw period,” says Brandon Juodikis, a CFP® professional and founder of BRJ Wealth.  “This flexibility can be useful if you anticipate other expenses or renovations in the future.”

However, you won’t lock in regular monthly payments through HELOCs. Instead, you’ll face minimum monthly payments that can vary based on your interest rate over the course of the repayment period. The irregular monthly payments can be difficult to budget for. 

Since HELOCs are tied to your home equity, you risk losing your home to foreclosure if you don’t stick to the repayment terms.

Next step: See Insider’s picks for the best HELOC lenders >>

Credit card financing for an HVAC

Many homeowners already have at least one credit card in their wallet, or can easily get one. The convenience of using plastic to pay for your heating and air-conditioning system is appealing. 

But “if the balance is not paid in full by the due date, credit cards can have significantly high-interest rates compared to other financing options,” says Juodikis.

The relatively high interest rates can lead to expensive financing charges on your HVAC purchase. But you may be able to get around the notoriously high interest rates by opting for a card with a 0% APR promotional period, which gives you a chance of paying off the purchase without any interest charges.

Next step: See Insider’s guide to the best credit cards for home improvement projects >>

Government grants to help pay for an HVAC

In some situations, homeowners can tap into government grants to cover essential home repairs. Here’s a look at some of the options available:

• Low Income Home Energy Assistance Program (LIHEAP): Homeowners who meet certain income requirements can apply for LIHEAP benefits. In some states, homeowners can qualify to have their HVAC or furnace replaced at a minimum cost. 
• Grants.gov: Grants.gov collects all government grant opportunities. Use the tool to find home repair grants for homeowners.

• State-level grants: Homeowners in some states can access state-specific grants for assistance replacing their HVAC system. 

HVAC financing FAQs