What is deck financing?
Deck financing is borrowing money from a lender to pay for a new deck. Of course, paying with cash will enable you to avoid paying interest, but financing allows you to pay for the deck over time by making monthly loan payments with interest.
A deck loan could actually be in the form of a personal loan, home equity loan or line of credit, credit card or contractor financing. 4 deck financing options
How you finance your deck depends on factors like how much home equity you have, your credit and income, the cost of your project, and how soon you want to pay off the money. Here are four financing options to consider.
An unsecured personal loan doesn’t require pledging your home as collateral, so the interest rate may be higher than with a home equity loan or line of credit. Online lenders offer personal loans, as do some banks and credit unions. Personal loan amounts are $1,000 to $100,000, and annual percentage rates range from 6% to 36%. Personal loans are repaid in fixed monthly installments, typically over two to seven years.
When they’re best: Personal loans are best for financing your deck if you don’t have enough home equity or want to use your home as collateral. They're also best when you need funds quickly — many lenders can fund a loan within a day or two.
Things to consider about personal loans
Fast funding. Many online lenders fund personal loans quickly (within a day or two of approval), while banks may take up to a week. In both cases, you’ll likely get funds faster with a personal loan than with home equity financing. Unsecured. Getting an unsecured loan means if you fail to repay, the lender can’t take your house or car. On-time payments will build your credit, while missed payments will cause it to drop. High credit and debt standards. Because lenders assess only your finances and creditworthiness, many have high credit standards and require a low debt-to-income ratio. You can apply for a joint or co-signed personal loan if you think you won’t qualify for a low rate on your own.
Home equity loans and lines of credit
Home equity loans and lines of credit are secured by your home and typically have lower interest rates than other financing options. While both options pull from your home’s equity, they don’t function the same.
Home equity loans provide the borrower a lump sum of money, which is repaid in fixed monthly installments, similar to a personal loan. The repayment period can be 20 years, and home equity loan rates are usually fixed, so the monthly payment doesn't fluctuate. Home equity loans are best if you have a firm cost estimate for the new deck or patio. You typically can't borrow more money once you’ve gotten a home equity loan, unless you open another equity loan to cover the original balance and the new amount.
Home equity lines of credit (HELOCs) function more like a credit card, although they're secured with your home's equity. HELOCs are best if you’re concerned about surprise expenses or want to have a line of credit for additional home improvement needs.
When they’re best: Equity financing works best if you’re comfortable using your home as collateral and have enough equity to pay for the project.
Things to consider about HELOCs and home equity loans
Tax benefits. When you use equity to pay for a home improvement, the interest may be tax-deductible. Secured financing. Home equity options have lower rates than personal loans and credit cards, partly because your home is used as collateral.
Long repayment terms. Both home equity loans and lines of credit can have repayment terms of over a decade.
On average, credit cards have higher APRs than personal loans and home equity options. But if you qualify, a 0% APR credit card may be your cheapest option. When they’re best: These cards are best when you qualify — meaning you have strong credit and little existing debt. A 0% APR credit card only makes sense if you can pay the full balance by the end of the promotional period, which is usually 15 to 21 months, depending on the card you pick.
Things to consider about credit cards
High credit standards. Cards with a 0% APR introductory period typically require good or excellent credit to qualify. You may be approved for the card, but not for the full amount you plan to spend on the new deck or patio. In that case, you can use the card for supplementary expenses or unexpected costs.
High rates after the promotional period. If you use a 0% APR credit card to finance a deck or patio and don’t pay off the balance, interest begins to accrue when the promotional period ends. Check the card’s post-promotion APR and decide whether you'd be comfortable paying it.
Monthly payments. Cardholders should plan to make monthly payments. If you’re late with your minimum payment, the issuer can cancel the promotion, leaving you with the balance and the card’s regular interest rate — the national average of credit card interest is 22.8%.
Deck contractor financing
Some contractors offer financing through a third-party lender, like GreenSky. These are often unsecured loans that a contractor offers once you agree on a cost estimate. When they’re best: This type of loan is best when it’s the least expensive option. Because the financing is offered through the contractor, they may be able to start on the deck or patio quickly if you use it.
Things to consider about contractor financing
Not all contractors offer it. Don’t expect every contractor that gives you a quote to provide financing.
It’s usually an unsecured loan. There’s usually no collateral for this type of loan, but missed payments will hurt your credit. And since the loan is unsecured, it will have higher rates than home equity options.
Financing may be offered on the spot. Once you agree on an estimate, the contractor may pull up an application and ask you to submit it right away. Even if it seems like a good offer, take time to review the rate and terms and compare it with other financing options.
How to compare loans for deck financing
How to get a deck loan
Here are the steps to get a deck loan:
Get a firm cost estimate. The cost of your new deck or patio can determine the best way to pay for it. Calculate your total cost and identify how much you need to borrow.
Pre-qualify. Once you have an estimate, pre-qualify with multiple lenders to see potential loan rates and terms. Pre-qualifying requires only a soft credit check, so it doesn't affect your credit score. Compare lenders. Lenders may offer different rates, funding times and repayment terms. Compare your options and find a loan with monthly payments that fit comfortably in your budget while offering the features you need.
Apply. Many lenders have an application process that is completely online. You’ll be asked to provide documents verifying your income like W-2s, pay stubs and bank statements. Lenders can inform you of a credit decision within a day or two of applying.
How much does it cost to build a deck or patio?
The cost to build a deck ranges from $4,341 to $12,586 on average, while a new patio can cost $2,000 to $6,000, according to home project hiring website Angi. The materials used to build the deck or patio can affect the final cost. Decks on the second floor of the house can cost more than double those on the first floor, according to Angi.
Keep in mind that a new deck or patio may need outdoor furniture or a grill that can add to your overall cost. Annual maintenance, like a new coat of paint or sealant, can cost an additional few hundred dollars but helps to ensure your outdoor space stays in good condition year after year.
