HVAC Financing: How to Finance a New Air Conditioning Unit

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Updated on Tuesday, February 9, 2021

Investing in a new air conditioning unit can be a good way to boost the resale value of your home, or simply make life at home more comfortable. However, it may be difficult to pay for such a significant expense out of pocket, in which case you may want to consider various types of air conditioner financing. Here are options for you to explore.

1. Contractor financing

Because some consumers need to borrow money to purchase a HVAC system, many companies that manufacture and install HVAC units offer their own financing plans. In most cases, they partner with a lender to offer in-house loans. While the terms of these offers vary, company financing can be a good deal if you can secure a low interest rate or 0% APR financing for long enough to be able to pay off your HVAC unit in full. Your eligibility for such offers will depend on factors like your credit score and income.

ProsCons
  • No-interest or low-interest financing
  • Convenience of one-stop shopping
  • Flexibility to choose the best option, not just the cheapest option
  • Potentially high interest rates
  • Short introductory offers
  • Additional fees

What to watch out for

  • Short introductory offers. While some HVAC companies may be able to offer 0% APR on their products for up to 60 months, not all companies will offer zero-interest terms for that long. Make sure you understand how long your 0% APR offer lasts, as well as how high your interest rate will be once it resets.
  • Deferred interest. Some HVAC financing offers may come with deferred interest. This means that while you may be offered a 0% interest rate offer, you could be charged interest from the original purchase date if you don’t pay off your balance within a certain period of time.
  • High interest rates. Like other loans, the terms of your HVAC loan will depend on your credit score and income. Make sure to compare offers to find your best interest rate possible, whether it comes with company financing or another type of loan.
  • Fees. Make sure to ask about any additional fees you may be charged for your HVAC loan.
Tips for going through a contractor to finance a new AC unit: If you decide you want to compare company financing for an HVAC unit with other financial products, you’ll want to call around and ask HVAC vendors in your area. You can also research HVAC companies that offer in-house financing online. Ask about and compare financing plans, interest rates and any other fees.

2. Store credit card financing

Because getting approved for a department store credit card can be easier than with other types of financial products, you may be tempted to apply for one, especially if you have poor credit. But store credit cards can come with high interest rates, and you may only be able to use your card at one store.

As with financing you may get through the contractor, a store credit card may offer a 0% deferred interest rate. This means you’ll get a limited down to pay down your balance, or else be charged interest from the original purchase date. On the flipside, you could get a discount or rewards any time you shop at the card’s store. So this could be a viable option if you’d save a significant amount of money on your HVAC unit or frequent the card’s store in the future.

ProsCons
  • Promotional discounts
  • Credit-building tool
  • Potential to earn rewards
  • Low credit limits
  • High interest rates
  • Limited use

What to watch out for

  • Cranking up your credit utilization ratio. If you don’t have any other credit cards, the low limits of a store card can increase your credit utilization ratio above 30%, which will negatively impact your credit score.
  • Increased unnecessary spending. To earn more rewards, you may be tempted to make unnecessary or impulsive purchases on your new card, which could increase your debt load.
  • Deferred interest. If your card carries a deferred interest period and you’re unable to pay off your balance before it ends, you will have to pay high interest rates on the original purchase.
Tips for using a store credit card to finance a new AC unit: Pay your card off before the introductory period ends or try to make larger monthly payments to cut down on interest charges. Look for a no-fee card with lower APR rates and perks that are useful for you.

3. Home equity loan or HELOC

A home equity loan is similar to a personal loan in that both offer fixed interest rates, fixed monthly payments and a fixed repayment timeline. However, personal loans are unsecured loans, whereas home equity loans are secured by the equity in your home. This means that if you fall behind on payments, your home could be foreclosed on.

Another option for financing air conditioning units is a home equity line of credit (HELOC), which is a revolving line of credit that is similarly secured by your home. HELOCs have variable interest rates, and you only pay interest on the amount you borrow, so your monthly payments will vary.

The amount you can borrow with a home equity loan is typically limited to 85% of your home’s value. For this reason, if you’re looking to buy a new AC unit, this option may not work for you unless you have considerable equity in your property. On a positive note, the interest rate you can qualify for may be lower than with other financial products since the loan is secured. The interest you pay on your home equity loan may also be tax-deductible.

ProsCons
  • Low interest rates
  • HELOCs let you borrow as needed
  • Fixed APR and monthly payments
  • Home is used as collateral
  • Need equity in your home
  • Closing costs

What to watch out for

  • Closing costs. Home equity loans come with many of the same fees as a traditional mortgage, including: application fees, loan processing fees or origination or underwriting fees, lender or funding fees, appraisal fees, document preparation and recording fees and broker fees.
  • Home used as collateral. Because home equity loans are secured by the value of your home, you could lose your home to foreclosure if you don’t repay the home equity loan.
  • Need equity. These loans are intended for consumers who have considerable equity in their homes, which is why you can only borrow up to 85% of your home’s value in most cases. If you don’t have a lot of home equity, you cannot qualify for a home equity loan.
  • Slow application process. A home equity loan can take two to four weeks to close on. This is slow when compared to other financial products like a personal loan, which could have funds deposited in your account the same day you apply.
Tips for using a home equity loan or HELOC to finance a new AC unit: If you’re considering a home equity loan to finance your HVAC purchase, you’ll want to shop around to find a loan with the lowest interest rate and fees you can find. Compare several loan offers to ensure each lender or broker is competing for your business with your best loan terms possible. You can compare home equity loans online on LendingTree’s loan marketplace.

4. Personal loan

Another option is to use a personal loan to finance an AC unit. This financial product can be either secured or unsecured. Personal loans come with fixed interest rates and a fixed repayment schedule of 12 to 60 months or longer.

Depending on your credit score, a personal loan may offer you a lower interest rate than a credit card. However, borrowers with bad credit will have a hard time qualifying for an unsecured personal loan with good terms, if they get any loan offers at all.

Make sure your personal loan comes with terms you can live with. To compare loans and estimate the costs of borrowing, use this personal loan calculator.

ProsCons
  • Fixed APR and monthly payment
  • Strong credit borrowers may qualify for low APRs
  • Lump-sum loans up to $50,000
  • APRs can be high
  • Fees and penalties
  • Not all borrowers will qualify

What to watch out for

  • Potentially high APRs. Since most personal loans are unsecured, you may have to pay higher amounts of interest than if you could back up your debt with collateral. Keep in mind when you shop lenders that the lowest offered APRs are for borrowers with top-tier credit, too.
  • Fees and penalties. You may have to pay origination fees of up to 8% of the total amount of your loan. These charges are typically used to cover administrative and processing costs. However, not all lenders charge an origination fee.
  • Qualification. Depending on your financial circumstances and credit score, you might not qualify for a personal loan with affordable terms. If you carry a lot of high-interest debt, make little income, or have a thin credit file, you may not be able to get approved. In this case, it would be a good idea to spend some time paying off your debts and building up your credit score so you can apply again.
Tips for taking out a personal loan to finance a new AC unit: How much you’ll pay to access a personal loan depends on the interest rate and the fees you’re charged. With that in mind, you should compare offers to find personal loans with the lowest interest rate and lowest fees (or no fees). Also, make sure your personal loan doesn’t have a prepayment penalty so you won’t suffer financial consequences if you pay your loan off early.

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5. 0% APR credit card

A credit card can be a valuable tool when used with careful thought and consideration. It can make sense to finance an HVAC unit with a credit card in many situations, especially if you can qualify for a low interest rate or even an introductory 0% APR on purchases.

If you’re using a card that offers an intro 0% APR period on new purchases, you’ll want to read the terms of your offer to see how long it lasts. Once your introductory 0% APR offer ends, the regular purchase APR will apply to any balance remaining after the end of the intro period. Some credit cards charge deferred interest, meaning you have to pay interest on the remaining balance and interest that would have been charged to the amount you paid off during the 0% APR period.

A credit card could be a good option if you are confident you can pay off your balance before the introductory period ends. Snagging cash back or other rewards could make your purchase more worthwhile, too.

ProsCons
  • New customers may snag a 0% APR offer
  • Flexibility to shop and spend as needed
  • Can offer rewards like cash back
  • Intro APR offers expire
  • Need good credit to qualify
  • Standard purchase APR can be high

What to watch out for

  • Length of introductory 0% APR offers. If you can’t reasonably pay off your card in full by the end of the introductory period, you could be stuck paying an extremely high APR on not just the balance but the entire amount of your purchase depending on the card’s terms.
  • High-standard purchase APRs. While earning rewards on your HVAC system can make sense if you have the cash, it is not a smart move if you plan to carry a balance. Considering the average credit card APR is 15%, the rewards you earn would be dwarfed by the interest you’ll pay over the long run.
  • May not have a high credit limit. Your finances will influence the credit limit you receive on your card. If you apply for a card but don’t get a high-enough credit limit, you may need to split your HVAC purchase between your card and another financial product.
  • Not all borrowers will qualify. Depending on your credit score, income and amount of existing debt, you may not be deemed creditworthy enough by the lender to be eligible for introductory APR offers. In general, these offers are reserved for strong-credit borrowers.
Tips for using a credit card to finance a new AC unit: If you’re looking for a credit card to cover your HVAC purchase, it makes sense to consider your goals first. If you’re seeking a card that offers 0% APR on purchases, you’ll want to understand how long the interest offer will last as well as any applicable fees.

Air conditioner financing FAQ

On average, you can expect to pay between $3,350 and $4,912 to install a new AC unit.

There are many ways to finance a new air conditioner, from taking out a personal loan to using a 0% APR credit card. The best way to pay for your new unit will depend on your unique financial circumstances, but is ideally one where you can make your monthly payments in full and on time.

Many HVAC companies will offer in-house financing such as credit cards and loans, or by partnering with a third-party lender.

Some government programs do provide financial assistance for covering the costs of a new air conditioning unit. The Low Income Housing Energy Assistance Program (LIHEAP) helps those who qualify for financial aid to manage costs associated with energy bills.