How to Finance a Deck

If you're like a lot of homeowners right about now, you've been self-isolating long enough to have an entire list of things you want to change about your home. One of those things may be to build or replace a deck overlooking what will surely one day be a marvelous garden. Given that it costs roughly $30 to $60 per square foot to add a deck, you may also be exploring your deck financing options. Here, we'll discuss deck financing, how to find the best lender, and things to consider before taking the leap.

Can you finance a deck?

Like any home improvement project, you can finance a deck. Before you fill out a loan application, though, keep two things in mind:

1. Price per square foot varies wildly by deck builder. Get several bids before deciding which contractor to hire.
2. As excited as you may be to get started with the deck installation, take time to investigate your financing options, including finding which lender offers the best low-interest personal loans, best repayment term, most affordable monthly payment, and lowest loan fees. The great thing about building a deck in your backyard is the results aren't essential. Unlike replacing a roof or repairing a leaky basement, you have time to think about it and find the financing solution that is just right for you.

Best ways to finance a new deck

No matter what your ideal deck project looks like in your mind's eye, there's a way to pay for it. Here are some of your best options for covering the cost:

Personal loan

The best personal loans are flexible. Once you're approved, most lenders allow you to use a personal loan for anything, from building an experimental airplane in your garage to adding a custom deck to your home.

One of the nice things about this home improvement project -- whether you add a wood deck, composite deck, or a mix of the two -- is that it adds value to your property. Here's how to do it:

• Shop lenders. Keep an eye out for a low interest rate, a loan term that works with your budget, an affordable monthly payment, and attentive customer service. If you have an excellent credit score, you should have your choice of lenders that will bend over backward to work with you.
• Apply with several lenders. In order to get a sense of your credit profile, most lenders conduct a soft credit check (which doesn't affect your credit score). Once they've checked your credit score, a lender will let you know if you qualify for a loan. If so, they fill you in on the details, including the interest rate, loan term, monthly payment, and any fees attached to the loan.

• Choose a lender. Once you have several quotes in hand, inform the lender you wish to work with that you want to proceed with the loan. That's when they'll conduct a "hard" credit check that will have a small impact on your credit score. Every borrower experiences this and it's nothing to worry about. As long as you make regular monthly payments, your personal loan will improve your credit score.
• Provide documentation as needed. In the final stage of loan approval, the lender may ask for additional documentation, like pay stubs or tax returns. The faster you get these documents to the lender, the faster they can finish processing your loan.
• Sign loan documents and wait for funding. How long it takes to get a loan varies by lender. Generally, it takes between 1-14 days to get the loan proceeds into your bank account.

The majority of personal loans are unsecured loans, meaning you don't have to provide something of value as collateral in order to get the loan. More on this in a moment.

Loan through the deck builder

Some deck builders offer financing, often through a partner lender. If your contractor offers you a financing solution, take a look. It's good to have options to compare.

As convenient as it may be to accept the financing offer without rate shopping multiple lenders, it's still a good idea to compare other options. Given today's low interest rates, another lender may be able to beat the interest rate and terms. And if no one else beats the interest rate and repayment term of the contractor's lender, you can always circle back around to them.

Home equity loan

As a homeowner, you have the option of using some of the equity in your home to fund home improvement projects, like a new deck. Home equity loans are fairly straightforward.

Let's say your home is worth $275,000 but you only owe $175,000 on the mortgage. That means that you have $100,000 in equity. Borrowing against that equity allows you to snag a loan at a low interest rate. That's because your home acts as collateral -- something that you own that can be used to secure the loan. If you fail to make payments as agreed, the lender has the legal right to take possession of your home, sell it, and recover their loss.

Home equity loans can be a powerful financial tool, but they also put one of your greatest financial assets at risk. Be very sure you can keep up with the monthly payment before opting for a home equity loan.

Home equity line of credit (HELOC)

A HELOC is similar to a home equity loan, with a couple of key differences.

When you take out a traditional home equity loan, all loan proceeds are disbursed right away, and you repay them in equal monthly installments. With a HELOC, once the lender approves you, you're given a credit limit. You can take out as much or as little of that limit as you need. Once a portion is repaid, you can borrow it again, typically up to 10 years from the time the loan is granted.

Most HELOCs give you 20 years to repay the entire outstanding balance. Like a home equity loan, a HELOC is secured by your property.

0% promotional rate

Another perk of having excellent credit is the ability to qualify for a credit card with a 0% promotional rate. These cards typically give you 12-18 months of interest-free borrowing.

If you can swing the monthly payment, a card with a 0% promotional rate represents a great way to finance a new, beautiful deck. For example, if your deck costs $10,000 and your promotional rate lasts 18 months, 18 equal payments of $556 will pay the project in full. And there will be no interest as long as you pay it off on time. If you choose not to pay it off in time, calculate your interest payments with this handy credit card interest calculator.

Things to consider when financing a deck

Having fair or poor credit doesn't mean you must give up the dream of sipping a glass of wine as you watch the sunset from your pergola-covered deck. It may be a while before we see interest rates this low again, so check lenders that specialize in loans for borrowers with poor credit before counting yourself out.

Even if you must postpone your dream until you boost your credit score, don't give up on it. A new deck gives you something to look forward to as your financial situation continues to improve.