New Furnace Financing
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Best Furnace Loan Options for Good & Bad Credit
Most of us would struggle without a fully functioning furnace. There are not many places in the U.S. where you don’t need heat at some point of the year and there are quite a lot where living through the winter would be verging on impossible without the comfort that only a furnace can supply.
But furnaces don’t last forever, and when it comes time to replace one, you soon find it’s not going to be cheap to get your heating back up and running. If your furnace is failing or has given up on life you’ll likely need to consider your financing options to get everything in order before the cold weather hits.
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Can you finance a new furnace?
Happily, the answer to this question is a resounding yes. There are many lenders prepared to offer finance for this expensive but vital piece of home equipment. So, if you don’t want to stretch your resources to the breaking point, or simply can’t find the cash, keep reading to find out your options for financing a furnace.
Best Furnace Personal Loans
Among the lenders you should look at for a personal loan for furnace financing are the following:
Axos offers loans of up to $35,000 to those with good to excellent credit.
Discover will lend a maximum of $35,000 and promise funding in a single business day after acceptance.
✔ Minimum Credit Score: 660
✔ APR: 5.99% - 24.99%
✔ Loan term: 3 - 7 years
✔ Funding turnaround: within 24 hours
With Discover personal loans, borrowers can apply up to $35K in funding as fast as next business day. Best for those who want to consolidate debt and have a good credit score.
LendingPoint’s loans start at just $2,000 and are generous with their credit requirements.
✔ Minimum Credit Score: 580
✔ APR: 9.99-35.99%
✔ Loan term: 2 - 4 years
✔ Funding turnaround: as fast as within 24 hours
With LendingPoint, borrowers with fair credit can obtain a loan between $2,000 - $36,500 and get funded within 24 hours. Origination fees may apply.
OneMain Financial also caters to those with less than perfect credit.
✔ Minimum Credit Score: no minimum requirement
✔ APR: 18.00 - 35.99%
✔ Loan term: 2 - 5 years
✔ Funding turnaround: 24 - 48 hours
With OneMain Financial, borrowers can obtain a personal loan of up to $20K without a minimum required credit score. Origination fees do apply and the lender offers bonus financial education tools and calculators.
Universal Credit can provide loans of up to $50,000 and has options even for those with poor credit.
How much does a new furnace cost?
The cost of a furnace depends on its capacity and sophistication. You might expect to pay between $1,500 and $2,500 for a mid-efficiency unit – that’s a furnace that has an 80% to 89% annual fuel efficiency (AFUE) rating. A more efficient furnace, with an AFUE rating of greater than 90%, will cost more – somewhere in the $3,000 to $5,000 range.
Higher efficiency means that less of the fuel consumed is wasted. However, though this saves on your energy bills, not only do high-efficiency furnaces cost more to buy, they are often more expensive to repair when they go wrong. Ideally, go for a new furnace that has an AFUE rating above 90% but not more than 95%, that’s when repairs get seriously more costly.
On top of the cost of the furnace itself, you need to add in installation costs, generally in the $1,000 ballpark, plus changing the filter regularly and an annual service. Filters are pretty cheap – around $5 to $30, and a service is around $120.
Generally, you need somewhere between $3,500 and $6,000 to replace your old furnace.
How do you finance a new furnace?
Most people will find a personal loan is the most affordable way to finance a new furnace. Rates are generally low, between 11-24% for those with reasonable credit and lower for those with excellent credit. Using a personal loan means you won’t have any nasty surprises down the line and you know you’ll pay it off in the defined time frame. It’s also tied to you, rather than your home as some of the other options we’ll cover shortly.
Furnace installation companies often offer finance in partnership with an approved lender. This can make the whole process straightforward but you need to check that you can’t get cheaper finance elsewhere. Make sure you read the fine print before signing.
Getting a credit card to fund a new furnace might be an option so long as the amount required is not too great and you can qualify for a low-interest credit card or one with a long 0% APR period. Make sure you budget carefully so that you pay off the loan before that period runs out. Any outstanding amount will be hit with a normal credit card APR and that’s not the cheapest form of finance, though a balance transfer may be an option.
Approaching a lender that offers a home equity line of credit (HELOC) may be an attractive choice for finance. Operating much like a credit card, a HELOC often offers high credit limits, low-interest rates, and long repayment periods. The only downside is that a HELOC is much like a second mortgage and should you default, the lender has the right to seize your home.
Home Equity Loan
A home equity loan is a second mortgage, and as such, usually has a low interest rate and long term, typically 5 - 15 years. It is often a cheaper option than a HELOC but has the same possible problem that your home is collateral for the loan.
Another option worth mentioning here is a 401(k) loan. Some retirement plan providers allow you to take out a loan from your future retirement savings. Provided you’ve saved at least double the cost of your new furnace for retirement, you should be able to borrow from yourself. This requires no credit check or interest, but you need to fully understand how it will set your retirement plans back. That said, a new furnace for your home is a good reason to borrow from your future.
Some furnace companies offer essentially furnace leasing so you pay a monthly fee and then a lump sum at the end of the term. This usually requires no credit check. The terms and costs around this vary significantly, so if a company near you offers this do your research thoroughly to ensure it’s the right option for you.
The government has schemes that help those on low incomes, with special needs, and to help improve the environment. Start by checking out the Low Income Home Energy Assistance Program (LIHEAP), the Energy Star Program, and the Weatherization Assistance Program.
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What credit score is needed to finance a furnace?
The better your credit, the better loan deal you will be able to secure. A FICO score of 600 or above is recommended and you will find it difficult to qualify for a personal loan if your score is below 540. If you have a poor credit score and winter is approaching, don’t despair, there will be an option out there for you.
How long can you finance a furnace for?
Although a HELOC or a home equity loan might offer longer terms, most furnace finance options have repayment periods of between 12 months and 5 years.
What are the pros and cons of furnace financing?
- No one wants to wait to get a working furnace, and getting finance means you can get a new furnace when you need to.
- A loan allows you to spread payments rather than having to find a single large lump sum.
- Taking out a loan and making sure repayments are on time for the duration of the loan actually helps to improve your credit score.
- A new furnace will almost certainly be more efficient than your old one and so be more economical to run.
- Getting finance is nearly always more expensive than paying with your own money.
- Repayments are another monthly outgoing that could put pressure on your income.
- If you miss payments your credit score will suffer.
Should I finance a furnace?
If you have savings that could pay for all or even some of the cost of a new furnace then that may be an alternative to getting finance. However, many people don’t have a stash of money ready for a rainy day and you can’t do without heating for very long.
How much will furnace financing cost?
If you think furnace financing is for you, see how affordable it may be using our finance calculator:
Compare and apply
If you decide that furnace financing fits in with your needs, take your time to explore the options, and choose the lender that best fits in with your situation. Collect the documents you need and make your application.
Online personal loan application is fast and easy with approval decisions reached quickly. Once approval is granted funds are often in your bank account within a couple of business days. Start your search now by comparing the loans in our tables - when you find the right one for you, all you need to do is click apply and you may have your funding in as little as 48 hours.
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