HVAC Loans: The Best Financing Options for 2024

The benefits of financing HVAC replacement

It’s always tempting to save up for a big expense. But financing an HVAC replacement could actually cost less, long-term — if not from your pocketbook, than your sanity.

Financing lets you have AC and heating when you need it. An HVAC loan allows you to spread out the cost over months or years, letting you keep financial liquidity for future emergencies. Plus, you can get a newer, more efficient system the right way — rather than struggling with increasingly less cost-effective repairs.

“My mother has an air conditioner on her roof that is 42 years old,” says Bradshaw, an HVAC expert with over 22 years in the field. “The amount she would save if she put in a new system would be huge. Bills would go from $400 a month to $200, just based on a new system’s efficiency.”

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And there are many HVAC financing options available, each with its own pros and cons. The best way to finance an HVAC system depends on your circumstances. Wilson says the best way to compare loans is to look at the raw numbers. 

“Borrowers should look at the interest rate, the monthly payment, the term, if there’s a prepayment penalty, if there’s a cost just for you to do the loan,” he says. “So that you know what you are getting into.”

Potential pitfalls of loans can include fees that increase the cost of the loan or terms that do not allow for an early payoff. For instance, a $10,000 loan with $5,000 in origination and early payoff fees would mean paying $15,000 out of pocket.

So, when you need funds to replace an HVAC system immediately, don’t panic. The money is there. But you need to take the time to compare all the options you qualify for. 

Let’s dig into some of those options.

Personal loans

“A lot of the loans at Acorn are personal,” Wilson says. He goes on to say these loans have many benefits for the borrower. “There is no collateral; it’s based on you and your credit. It’s not based on your house or anything like that.” 

The interest rate for a personal loan can vary greatly depending on your credit score, history, and other factors. When looking at any loan, be sure you understand the terms, especially things like potential penalties for paying off a loan early. 

Wilson notes, “Life happens. Make sure you can pay off the loan when you want to.”

HVAC company financing

Many HVAC companies have preferred lenders who will offer financing with credit approval. You will typically have to submit a loan application to show your ability to pay, including paystubs and a credit report. There’s a clear advantage to this: It’s simple. You only work with one entity. But, by not shopping around, you could end up with less than favorable terms.

If you’re interested in this method, ask your local HVAC companies about their best offers. Some may even have 0% interest loans available or significant rebates to cut down the costs. On the other hand, it also means you need to get an HVAC system through the company that will provide you financing — you could find cheaper HVAC systems available elsewhere.

Tip

Finally, be aware that most HVAC companies farm out their loans to other financial enterprises — always look at the finalized loan schedules rather than taking the terms and conditions on faith. Your HVAC salesperson might not have a deep understanding of the loan they initially presented.

Utility company loans

Something people don’t often consider: The utility company may have loans available, too. This is especially common if you get your electricity from a co-op. And even if they don’t have loans, they could have grants or billing adjustments — all intended to encourage responsible energy use.

To check whether your power or gas company offers loans for a new HVAC system, call them or visit their website. For example, Dominion Energy North Carolina will finance a qualifying HVAC system and add the payments to your monthly gas bill. Many energy companies have their own state-related initiatives.

Important

If you do not qualify for a loan or your power company does not offer it, you still may be able to save money with rebates from your power company. Check your local utility website to see which HVAC models and systems are covered. It never hurts to ask!

Personal credit card

This can be a convenient option if you have enough available credit through personal credit cards — or if you’re getting an amazing deal on a single part, such as a furnace or a compressor.

You don’t need to go through the loan approval process; just hand the HVAC contractor your card. However, personal credit cards rarely offer the best interest rates for home improvement projects. A personal credit card will frequently have an interest rate of about 20% — and that’s money you could spend on other home improvements.

There’s one caveat. If you don’t have any other options, it’s possible to pay for a necessary repair on a personal credit card and then take out a personal loan to pay off that credit card later. But it’s usually better to just skip the middleman entirely.

Government loans and assistance

The U.S. Department of Energy (DOE) offers energy-efficient financing through government-insured or conventional loan programs. These can be used to purchase a new home with energy-efficient features or refinance an existing loan and use proceeds to pay for things like new HVAC systems. 

Many state energy offices also offer funding options. You can find your state’s office through the National Association of State Energy Officials.

Finally, some homeowners may also qualify for energy grants through the DOE’s Weatherization Assistance Program. These can sometimes be used to install or replace an HVAC system.

Even if you can’t get a government loan to cover the cost of your HVAC system, ask your tax advisor regarding tax credits. You might be able to write off your expenses or get additional tax credits for installing energy-efficient units. This could greatly impact the affordability of a given solution.

Home equity loans

Home equity loans allow you to borrow money using the equity in your home as collateral. These lump sum loans are paid back at a fixed rate over a pre-agreed term. 

Most homeowners already have a relationship with a lender: the bank that services their mortgage. However, you should also look at other lenders to see if they can offer you a better interest rate or terms.

Wilson also cautions: Ask for the right amount when looking for a loan. Too frequently, homeowners will ask for exactly the amount they think they need, and that doesn’t leave them with a buffer for future costs.

With HVAC, you're getting the cost of the furnace and the air conditioner replacement, but you're not thinking about the ductwork. Make sure everything's in there so your loan covers it

James Bradshaw
Collins Commercial Services

You can work closely with your contractor to ensure all the costs are covered — it’s in their best interest to give you the most accurate amount. But still, keep in mind that things could be revealed while installing your new HVAC system; if they discover something rotted out, for instance, you’ll be making some minor structural repairs alongside your new AC and furnace.

Things to think about before you apply

The first step is to closely evaluate your financial situation and needs. Look at quotes from multiple HVAC companies to ensure you get the best deal. Then, look at loan calculators to be sure you can cover the monthly payments.

Compare interest rates from multiple lenders, as well. A percent or two difference can mean hundreds of dollars more or less over the life of a loan.

Check out lender reviews, as well. While everyone’s situation is different, what others have experienced can tell you much about what to expect when you do business with a lender. 

Wilson also urges people to be sure they understand all the loan terms. 

“Some people rush through without looking at the details,” he says. This can result in people paying extremely high fees or committing to conditions like prepayment penalties. By ensuring you understand every line of an agreement and its implications, you can empower yourself to make the right financial choice.

Explore your loan options with Acorn Finance

Acorn Finance works with a network of reliable lenders who offer competitive rates. Their streamlined application process means you can fill everything out once and then get offers from multiple lenders for your home improvement project.

Ready to feel comfortable in your own home again? Get started with your loan application at Acorn Finance today.

Lara Manetta is a freelance writer based in Florida. She’s written extensively about local and national real estate trends, including a book for doctors interested in real estate investing. When she’s not writing, you can find her kayaking, reading, or sailing.