Does your roof need an upgrade or an outright replacement? If so, getting the funds together to cover the costs can feel daunting. The good news is that there are several roof financing options available.
However, the rates and terms of these options vary. The best deal for you will depend on several factors, such as your budget, credit, income, and personal preferences. Therefore, we’ll cover each one, their pros and cons, and who might want to consider them.
5 ways to finance your roof repair or replacement
Before you look into any of these roof financing options, look at your financial situation and your credit history. That way, you’ll have a better idea of which might better suit your situation.
The cheapest way to finance your roof is to pay for it with cold hard cash. Since it isn’t a loan, you aren’t required to have good enough credit to get approved. You also won’t need to pay interest.
Unfortunately, this option only works if you have the cash saved up. It costs $784 on average for a roof repair, according to HomeAdvisor. But a complete or even partial roof replacement can run you in the thousands.
Also, this option works best if you don’t already have plans for that cash. If it’s your emergency fund, for example, you may want to keep that money for a rainy day. If, however, you have enough cash on hand for roof financing and other financial goals, it may be your best bet.
2. Personal loan
While some lenders have restrictions, you can typically use a personal loan for just about any expense, including roof financing. There are some lenders who even specialize in personal loans for bad credit, albeit at high interest rates.
The average interest rate on a two-year personal loan is 10.12%, according to Federal Reserve data for the third quarter of 2018. If you have great credit, you could get even lower than that.
If you have bad credit, though, some lenders charge upwards of 30%, or even higher for worst-case scenarios.
In addition, different personal loans come with different rates, fees and requirements, so check out what the best personal loans are to ensure that you choose the best option for you.
That said, personal loans have set repayment plans, unlike credit cards. Also, you can typically get the funds within a week, and as early as the same day.
3. Credit card
Putting the cost of a roof repair or replacement on a credit card may sound like a bad idea. But if you can qualify for a credit card that offers a 0% APR promotion, you could pay off the costs of fixing your roof interest-free.
There are a couple of things to note, however. First, you typically need good to excellent credit to get approved for 0% APR credit card. Second, there’s no guarantee that your credit limit on the new card will be enough to cover the cost of the roof.
As a result, this option is best for people who can qualify for such a card and may have other options to make up the difference if the card’s credit limit is too low.
4. Home equity loan
A home equity loan is another alternative for homeowners who have significant equity in their home. Because it’s a secured loan — your home acts as collateral — you can typically qualify for lower interest rates, even if you have bad credit.
What’s more, you may be able to deduct the interest you pay from your taxable income if you can prove that fixing the roof substantially improves the home.
But if you default on the loan, you could end up losing your home. Also, some lenders charge high fees to process the loan. So, if you decide to go this route, shop around.
A home equity loan is best for people who may not have the best credit, but aren’t worried about potentially losing their home through a default.
It’s also worth looking into if it’s considered a substantial improvement to the home, thus making you eligible to deduct the interest you pay.
5. Point-of-sale financing
Some contractors offer what’s called point-of-sale financing. This allows you to apply and qualify for a loan directly through the contractor’s website.
With this type of financing, you’ll work through a company like SuperMoney to get pre-approved quotes from several lenders. This process allows you to compare rates and fees, and choose one of the lenders to apply.
Once you get approved, you could get the money as soon as the same day.
“[You’ll have] the ability to break payments up over time, rather than paying all at once,” says Katherine Pomerantz, an accountant at the BookKeeping Artist.
“There’s also an increased incentive on the part of the contractor to complete the work quickly.” After all, they know you have the money in hand and don’t have to wait for financing for each installment.
As you shop around for contractors, ask if they offer point-of-sale loans. If not, encourage them to offer it as another option to give customers more flexibility.
Point-of-sale financing is best for people who want more flexibility and don’t want to have to apply with multiple lenders to make sure they get the best rate.
It’s also a good idea for someone who wants the convenience of being able to apply through the contractor’s website and pay off the loan over time through the lender.
Which option is best for you?
There’s no one best way to finance your roof repair or replacement. So, it’s important to consider all of your options. Again, take a look at your financial and credit profiles before making a decision.
If there are things you can address quickly to improve your credit or boost your cash holdings, consider putting off the roof job for a month or two. But if not, go with the option that best suits your needs and will save you the most money in interest.
Ben Luthi is a personal finance writer and a credit cards expert who loves helping consumers and business owners make better financial decisions. His work has been featured in Time, MarketWatch, Yahoo! Finance, U.S. News & World Report, CNBC, Success Magazine, USA Today, The Huffington Post and many more.