Air Conditioner Finance Options in 2024
It can cost upwards of $10,000 to replace your AC. This hefty unexpected expense might have you feeling the heat — literally.
You might think the only choice you have is to take out a loan. But what kind of loan should you get, and what if you don’t qualify? Reviewing your air conditioner finance options is the first step toward a more comfortable home (and bank account).
What are my air conditioner finance options?
You may have several choices for air conditioner financing, with some easier to qualify for than others.
We used proprietary LendingTree user data from Q4 2023 to find average rates for various air conditioner finance options. Your eligibility and rate depends on personal factors like debt-to-income (DTI) ratio and credit score. Still, these estimates could give you an idea of where to start.
Interestingly, our data shows that home equity loans had lower rates than home equity lines of credit. Generally, this is backward — home equity lines of credit usually have the lower rates between the two. This may be because our sample only included LendingTree users, not borrowers as a whole.
| Financing option | Average rates | Who qualifies |
|---|---|---|
| Home equity loan | 9.68% | May qualify with a credit score as low as 620 and a DTI ratio of 43% or lower |
| Home equity line of credit | 13.30% | Same as above |
| Personal loan | 16.01%-112.28% or higher, depending on credit score | Could qualify with bad credit, but best rates generally go to scores 670 and above |
| Contractor or retailer financing | Varies based on contractor or retailer | May need at least fair credit, but it depends on the contractor or retailer |
| Credit card | 24.61%, but may be higher or lower based on creditworthiness | Varies, but you’ll typically need a FICO score of at least 670 to qualify for a 0% APR credit card |
Home equity loan
A home equity loan, or second mortgage, allows you to borrow against the equity in your home. This secured loan uses your home as collateral. If you default, your lender can repossess your house.
Home equity loans come as lump sums and have fixed interest rates. Unlike a home equity line of credit, your payments will be the same each month.
| Pros | Cons |
|---|---|
Generally competitive rates Fixed rates Interest may be tax deductible if you use the loan for substantial home improvements | Must be a homeowner with equity to qualify Could lose your home if you fall behind May have closing costs If home value drops, may end up upside down Lump sum may not be ideal for ongoing HVAC projects |
Home equity line of credit
Home equity loans and home equity lines of credit (HELOC) may seem similar, but they have distinct differences. For one, you can borrow from a HELOC over and over for a certain period. Home equity loans provide one lump sum.
Also, HELOCs have variable interest rates, or interest rates that are tied to the market. Your monthly payments will go up or down based on your current rate and how much you borrow.
| Pros | Cons |
|---|---|
Only borrow what you need, when you need it Steady access to cash during draw period Like with a home equity loan, interest may be tax deductible | Must be a homeowner with equity to qualify Uses home as collateral Variable rates can be risky in a turbulent economic environment May have closing costs If home value drops, may end up upside down |
Personal loan
Like a home equity loan, you’ll get a personal loan as a lump sum. And if you have an unsecured loan (the most common type), you won’t have to put up any collateral.
Because personal loans don’t typically require collateral, it can be challenging to qualify if you have rocky credit. That doesn’t mean it’s impossible, although you may face high APRs and fees.
| Pros | Cons |
|---|---|
Lower APR than credit cards if you have good credit Fixed rates Unsecured personal loans don’t require collateral | May be hard to get if you have bad credit Can be expensive if you qualify with fair-to-bad credit Possible origination fees |
Personal loans are easy to find. To start, check out:
Online lenders
Online loans are convenient. You don’t have to leave your home, and most provide quick approval decisions. Also, many online lenders specialize in bad-credit loans, which could help if you’re having a hard time qualifying.
To find the most competitive loan, compare multiple offers, paying special attention to APRs, loan terms and loan amounts. LendingTree makes it simple. You can compare up to five lenders at once on our loan marketplace with no impact to your credit.
Banks
If your bank offers personal loans, it may be worth applying. If you have a longstanding, positive relationship (and good credit), you might snag a competitive rate.
Note that many banks have pulled out of the personal loan business. For instance, personal loans are no longer available with Bank of America, Chase and Capital One.
Credit unions
Because the federal government has capped APRs to 18%, credit union loans are among the most competitive. And, as member-owned nonprofits, credit unions tend to keep their members’ financial well-being in mind. It may be willing to look past bad credit (as long as you can demonstrate your ability to pay back the loan).
Only members can take out loans. Further, you might be subject to a waiting period after joining before you’re eligible to borrow.
Contractor or retailer financing
Your contractor might offer its own HVAC financing program. Because they’re in charge of your loan’s terms, make sure you know what you’re getting into before signing. On the flipside, they might not check your credit to determine your eligibility.
If you’re buying your own HVAC (or heating, ventilation and air conditioning) unit from a retailer, you might qualify for special financing. For instance, you could get 0% APR on a Home Depot card.
But there’s a catch — deferred interest. As long as you pay in full by the end of the introductory period, you’ll avoid paying interest. If not, you’ll be responsible for the interest that would have otherwise accrued.
| Pros | Cons |
|---|---|
Might have a 0% APR intro period Could come in handy for future home improvement projects Application process may be simple, with quick approval decisions | Not all contractors offer financing Might be on the hook for deferred interest Harder to compare rates among contractors |
Credit card
A rewards credit card could be a great way to secure air conditioner financing while earning points, miles or cash back. AC systems aren’t cheap, so rewards may add up quickly.
The annual fee on some of these cards can be pricey — sometimes several hundred dollars a year. Plus, if your rewards card doesn’t fall into the 0% intro APR credit card category, you could pay more interest than you would with a HELOC or home equity loan.
| Pros | Cons |
|---|---|
Can use the card for things other than your AC unit 0% intro APR possible Might earn rewards | Can take discipline to avoid racking up debt Might have an annual fee Variable rates may not be ideal during times of inflation |
Where to get air conditioner financing for bad credit
Zero-interest loan from your electric company: Some electric companies offer interest-free loans to customers so they can install a new, energy-efficient AC unit.
You might not need a perfect FICO score, but you may need to meet other requirements. For instance, your company might require a positive payment history. Also, know that the company may put a lien on your property to secure the loan.
Secured loan: Like home equity loans and HELOCs, secured personal loans require collateral. For many, this will be your car, bank account or investment account. Since the lender can repossess your collateral if you default, these types of loans can be easier to qualify for.
Payday alternative loan: You’ll only find a payday alternative loan (PAL) from federal credit unions. If you’re a current member (or you don’t mind joining), a PAL could be a good option. But since PALs cap out at $2,000, these may be better suited for air conditioning system repairs rather than replacements.
Lease-to-own: You could find air conditioner financing through a lease-to-own program. Some HVAC companies offer lease-to-own, as do third-party companies. Some of these leases have higher-than-average APRs, while others have 0% introductory periods. Read your contract carefully.
Air conditioner grants
Weatherization Assistance Program: Low-income families could apply for the U.S. Department of Energy’s Weatherization Assistance Program (WAP). With it, you may be able to replace your AC and make other efficiency-related upgrades.
Your household income must be below 200% of the national poverty level to qualify. The program also prioritizes elderly and disabled applicants, as well as families with children under 12.
Low Income Home Energy Assistance Program: The Low Income Home Energy Assistance Program mainly provides short-term relief for energy bills. Sometimes, it offers grants to repair existing AC units.
Each state has a maximum grant amount. States also decide what energy-efficient expenses qualify for the grant. You must be low income, and if you receive SNAP, SSI or TANF benefits, you could be automatically eligible.
Air conditioner rebates and tax credits
Local rebate programs: Your electric company may offer a rebate for replacing your AC. The AC likely must meet certain efficiency standards. Call your provider for more details.
Energy Efficient Home Improvement Credit: You may be eligible for a tax credit of up to $600 for installing an energy-efficient AC unit. This may not help you recoup the total cost of your AC, but it might take some of the sting out.
Frequently asked questions
That depends on the type of loan you’re getting and the lender you’re borrowing from. You might qualify for a personal loan through Upstart with a score as low as 300. Home equity loans and HELOCS, on the other hand, require at least fair credit (620+).
If you have bad credit and are low income, an air conditioner grant is worth exploring. Also, contact your electric company to see if it offers zero-interest air conditioner loans.
If it doesn’t cause too much financial strain, you may want to pay cash. This may be the time to tap into your emergency fund.
Unless you qualify for 0% APR, you’ll pay for air conditioner financing in the form of interest. But if forking out cash for a new unit will cause you to fall behind, air conditioner financing could be your best bet.
There’s no hard-and-fast rule, but installing AC could increase your home’s value by about 5%-10%. On the other hand, a new HVAC unit could cost several thousand dollars. Do the math to see if the cost of the AC negates the potential increase in property value.
Also, a new air conditioner unit could be a good investment if it will save you money on energy costs.
If you’re planning to sell, replacing an outdated system could entice a buyer who’d otherwise not be interested. Before sinking in a bunch of money, talk to your real estate agent to decide if replacing your unit will be an effective strategy.