A hot tub or swim spa can be sizeable purchase ranging from $5000-$15000 for a hot tub and $15,000-$40,0000 for a swim spa. These estimates also don’t include electrical installation or a foundation to place the hot tub on. Many consumers aren’t flush with cash to pay to for these purchases outright or don’t want to tie up all of their cash even if they have it. Financing is a great way to spread out the purchase over time making it more affordable. It also allows for a more flexible budget so that you can buy a nicer, more desirable model with the features and upgrades that you otherwise might not be able to afford.
When considering hot tub financing it is important to explore all options available and find the most suitable for your situation. We’ve listed some popular suggestions below for reference.
Retail Financing (Directly from the Hot Tub Dealer) – This is the most common means of financing a hot tub as it is convenient and easy. Most hot tub dealerships offer some sort of retail financing to consumers looking to purchase a hot tub. It can be done right at the point of purchase and within a matter of minutes you can know if you are approved or not. Most hot tub companies ask for a down payment, however, 100% financing is also an option. Interest rates for retail hot tub financing range between 5%-15% and are based on credit score or credit worthiness. Retail financing can have higher rates because the loans are typically unsecured (unlike a car loan). Retail hot tub loans have a fixed interest rate and can be either installment loans or revolving lines of credit. Installment loans have a fixed rate and have a fixed term (12, 24, 36, 48 months etc..) for repayment. Revolving lines of credit have a payment factor which is a percentage of the outstanding loan amount that is due every month. For example, a $5000 revolving loan balance might have a 2% payment factor which would mean the payment is $100 per month.
A good time to consider retail financing is when there is a dealer promotion for 0% interest or a same as cash promotion. For example, a dealer may do a big event or sale and offer a 12 months no interest promotion. It is important to note that a dealer typically pays what is called a discount fee to the bank providing the financing. Essentially, it costs the dealer a fee to offer it to the consumer and in many cases the dealer marks up the price of the hot tub to cover the cost. It is important to do your research on models and prices in advance to make sure you are paying a fair price and not an exorbitant price just to get a financing promotion. In the industry there is a saying, “Are you buying a hot tub or are you buying financing?”. Be wary, as the longer or more enticing the financing promotion the more fees that are baked into the hot tub price to offset the fees. For example, a 5 year no interest promotion could have as much as 20% baked into the hot tub price.
Home Equity Line of Credit (HELOC) – A HELOC is a very common form of financing for consumers looking to borrow against their home in order to do improvements or add amenities like a hot tub or swim spa. The interest rates for HELOCs are typically on the lower end because they are a second mortgage secured by the home (collateral). HELOC interest rates are typically between 4-6% and have a variable interest rate as they are tied to an index. In some cases, the interest can be tax deductible which is another reason why HELOCs are appealing. You should check with your account or mortgage advisor for specifics on the tax advantages of a HELOC. Finally, HELOCs are revolving loans and have interest only payments which means that the payment is calculated daily on the outstanding loan amount and due once a month.
Keep in mind a HELOC can take several weeks to complete and may have other fees associated with home mortgages like escrow, title, and document fees.
Home Equity Loan – A home equity loan is very similar to the HELOC, however, it is an installment loan. The loan amount is predetermined and interest is charged on the whole amount with a fixed rate and fixed term.
Personal Loan or Signature Loan – These types of loans are offered directly thru banks, credit unions, or other financial institutions. Personal loans are typically installment loans with a fixed interest rate and fixed term. Rates can be on the higher side (10-20%) because these loans are unsecured and seen as higher risk.
Credit Card – A credit card is not a great option for long term financing as interest rates are high ranging from 12-25%. They can be a good option if they have promotional rate on them for period of time. For example, they may have a 0% for 6 months or 12 months after which the rate jumps to the default rate. Credit cards can be a great short term option for financing.