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AC Financing Options for a New Air Conditioning Unit

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Depending on where you live, a new air conditioning (AC) unit may be just a modern convenience or a necessity. This distinction becomes apparent when your old AC unit breaks down in the middle of summer and unexpectedly it’s time for a new one. Here’s what you’ll need to know about the cost of a new AC unit if you come across that sudden expense, and how to finance it.

How much is a new AC unit?

The cost of a new AC unit depends on a few factors: the type of unit, the cost of installation and the size of your home. The AC unit itself will typically cost between $1,200 and $1,800, according to HomeGuide. However, the report also says people spend $4,500 to $5,000 on average to replace or install a new AC unit. Those costs can range up to $10,000 or more if the installation is extensive or complicated.

That’s a significant amount of money for many people, and paying out of pocket may not be an option for everyone. If that’s the case for you, financing through a loan or other credit product may be the best option to keep you and your family out of the heat with a new air conditioner.

Where to find AC financing

Ways to finance a new AC unit
Financing option Average rates Who qualifies
Home equity loan 5.28% to 5.82% interest rate Typically those with a credit score of at least 620 and a debt-to-income ratio below 43%
Home equity line of credit 5.61% interest rate Those with a credit score of 680 or higher
Personal loan 7.63% to 38.64% APR* or higher, depending on credit Individuals with a credit score of 640 or higher (though some lenders will accept a lower score), a history of on-time payments and a steady income
Contractor/retailer financing Depends on special financing promotions, but can be as low as 0% APR for a number of months** Varies based on the contractor, retailer or lender
* APR, or annual percentage rate, represents the interest rate and other fees. It is a more accurate measure of your cost for borrowing.
** If you have a remaining balance when the offer ends, you’ll typically be charged interest from the purchase date.

Home equity loan

A home equity loan is a second mortgage that allows you to borrow against the equity you’ve built up through paying off your mortgage. Interest rates are typically lower than you would find with a credit card or a personal loan, which can help you save money in the long-term. One benefit of a home equity loan for this purpose is the ability to deduct the interest you pay on the loan from your taxable income. Just be aware that your borrowing is generally limited to 85% of the equity you’ve accumulated.

Home equity line of credit

A home equity line of credit is a revolving line of credit, like a credit card, which uses your home’s equity as collateral. You pay interest on whatever amount you use. HELOC interest rates are typically variable and borrowing is usually capped at 80% to 90% of your available equity. To qualify, you’ll generally need a loan-to-value ratio of 85% or less. But, on top of the interest rate, you’ll have to pay closing costs. So you’ll have to consider those costs when figuring out the true cost of borrowing.

Personal loan

LightStream Rocket Loans Peerform
APR 2.49% to 19.99% with autopay discount, rates are 0.5% higher without autopay 7.16% to 29.99%, minimum rate only available with autopay discount 5.99% to 29.99%
Terms 24 to 144 months 36 or 60 months 36 or 60 months
Loan amount $5,000 to $100,000 $2,000 to $45,000 $4,000 to $25,000
Origination fee No origination fee 1.00% - 6.00% 1.00% - 5.00% of the loan amount
Minimum credit score requirement Not specified 640 600

Personal loans are another AC financing option you may want to consider. Those who qualify for these lump-sum installment loans can typically get terms ranging from 12 to 144 months, with rates depending on credit. There are options if you have bad credit, too — though those are usually more expensive. Typically, lenders consider factors like your income, credit and current debt amounts to determine if you qualify and, if so, what the terms would be for your loan.

Contractor/retailer financing

Sears Home Depot Lennox
What it is Special financing when you charge the expenses to your Sears Card Consumer credit card or loan option Third-party loan
APR 7.49% - 27.49% variable or 14.00% to 29.99% fixed* Card: 17.99%-26.99% Variable
Loan: 7.99% fixed
As low as 0.00%
Loan terms 18 months special financing, after that any remaining balance would be charged full interest from the date of purchase Card: Up to 24 months special financing during promotions, otherwise six months special financing
Loan: 8 4 months
Special financing for months to qualified applicants
Loan amount $1,500 or more Card: $299 or more
Loan: Up to $55,000
Not specified
Minimum credit score requirement Not specified Not specified Not specified

*Rates accurate as of March 20, 2020

Some retailers and contractors offer financing options, like a store credit card that comes with special financing and loans. Sometimes these will be offered through a third-party lender. If you can get a low promotional rate (or even a 0% APR), and pay off the balance before the promotional period ends, you could minimize your costs. If you don’t pay off your balance before the offer expires, you could be hit with deferred interest from the purchase date.

Many of these retailers don’t advertise their credit requirements, so it’s difficult to know if you will qualify. If interested, be sure to check out each retailers’ fee schedules in addition to their rates. That way, you’ll get a more accurate picture of the total costs.

Air conditioning financing for bad credit

Secured loan: A secured loan is an installment loan that requires you to put down something of value as collateral. This can enable those with damaged credit to get access to funds, however, defaulting on the loan could mean losing your collateral. In general, it’s best to only use that which you can afford to lose and make sure the repayment schedule is suited to your financial situation.

Payday advance: A payday advance is when you borrow against your future earnings to meet your financial needs now. In some cases, you can do this through your employer to avoid paying the high interest that comes from a payday loan.

You may be limited in the amount that you can advance, so it likely will not be enough to cover the full costs of repairing or replacing your air conditioning unit. Also, doing this can be risky since it would decrease your future paycheck.

Payday alternative loan: These are loans offered by credit unions, to members only, as an alternative to costly payday loans. Typically these are smaller loans with shorter terms than you would find with a traditional loan. So if you require more than $1,000 to finance your new air conditioning unit, you may need to consider other options.

FAQs: AC financing

How much does it cost to repair or replace an AC unit?

It costs $4,500 to $5,000 to replace an AC unit, including installation costs, according to HomeGuide. But that will depend on things like the size of your home and the type of unit you purchase. Small repairs, on the other hand, can range from $125 to $459, while larger repairs may cost up to $2,000.

Do HVAC companies offer financing?

Some retailers and contractors offer financing options, like store cards and loans. Sometimes loans are made available through a third party.

Is a loan worth if for a new AC unit?

The least expensive option will always be to pay with cash and avoid debt. However, since the total costs can be up to $10,000 or more, a loan or other financing option may be required to help cover the price of a new AC unit. If you can wait a few months and save up, you could lower your costs by reducing the amount you borrow. But if you can’t wait, a loan can be a good way to shorten your timeline.

Can you qualify for AC financing with bad credit?

It depends on the kind of financing. For example, certain personal loans can help people with bad credit access the funds necessary to replace their air conditioner or HVAC system. But, in general, the best rates and terms will go to those who have the highest credit scores.

Are there any grants for air conditioning units?

There are some money-saving programs, like state-based or tribal grant programs, that may provide assistance to cover the costs of a new AC unit.  At a federal level, for example, the Low Income Home Energy Assistance program can help with weatherization and energy-related minor home repairs to those who qualify for aid. And, if you take out a HELOC or home equity loan, you can deduct the interest you pay and decrease your taxable income for more savings.


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