Home Equity vs. Personal Loan: Comparing Secured and Unsecured HVAC Financing Options
February 05, 2026 | Last Updated on: February 05, 2026
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When an HVAC system fails, upgrading or purchasing a new HVAC system is more expensive than many people can afford to pay with cash. But in extreme temperatures, it’s a necessity for home comfort, safety, and productivity.
Therefore, the question for most homeowners and small business owners isn't “should we replace/fix our HVAC system?” It's, “which HVAC financing options can help us pay for it?”
Thankfully, there are many HVAC financing options to choose from today. Two of the most common are home equity loans and personal loans. Each option has distinct advantages, risks, and timelines for funding.
Whether you're thinking of replacing your HVAC unit as part of a home improvement project or need a new unit for your home or business, our guide breaks down the pros and cons of both HVAC financing options.
Why Explore Financing Options for HVAC Systems
The average residential cost of an HVAC system ranges from $11,590 to $14,100. Meanwhile, a commercial system can run up to $50,000.
Other factors, such as new ductwork, square footage, local climate conditions, and the level of energy efficiency, can increase the total costs.
A new HVAC unit can result in higher energy savings through lower energy bills and help avoid more expensive repairs down the road.
Choosing the right HVAC financing option for your needs is also essential to avoid long-term financial strain.
Understanding Secured vs. Unsecured HVAC Financing Options
There are essentially two main types of HVAC financing options: secured loans and unsecured loans.
Secured Loans
Secured loans require collateral, that is, an asset that is pledged for the loan that a lender can claim if you default on the loan.
Common collateral for a secure loan includes:
- Home equity
- Real Estate
- Equipment
- Vehicles
- Precious metals
- Business assets
- Investment accounts or CDs
When going the route of secured financing for a HVAC financing option, most homeowners utilize a home equity loan or a line of credit to finance their HVAC replacement or purchase.
Unsecured Loans
Unlike secured loans, unsecured loans don't require collateral. Loan approval is typically based on factors, such as:
- Credit score
- Income
- Debt-to-income ratio
- Cash flow
HVAC Financing Options
Two of the most common types of loans for individuals looking to purchase an HVAC unit are home equity loans and personal loans. There are other HVAC financing options for small business owners seeking to finance a system for their businesses.
Option 1: Home Equity Loans as an HVAC Financing Option
With a home equity loan, you can borrow against the equity value of your property, that is, the amount of equity paid into your home loan. Home equity loans are often used for major upgrades, including HVAC and plumbing projects.
How home equity HVAC financing options work:
- The lender evaluates your home's market value.
- Existing mortgage balances are deducted.
- A portion of the remaining equity can be used in a home equity loan.
- Funds are dispersed as a lump sum.
Pros of Home Equity Loans
Home equity loans offer several advantages for larger HVAC projects.
Comparatively lower interest rates: Lenders offer more competitive interest rates for home equity loans than for unsecured loans because the risk to the lender is lower.
Longer repayment terms: The repayment tenure of home equity loans is usually long, depending on the lender and how the loan is structured. Because you have longer to repay the loan, you'll have lower monthly payments.
Higher borrowing limits: Most home equity lenders require the borrower to have a percentage equity paid into their mortgage. So you'll be able to borrow more than you would with other types of financing.
Predictable payments: A home equity loan usually has a fixed interest rate, unlike a credit card, which often has a variable rate, so your payments are predictable, making it easier to budget over the long term.
Cons of Home Equity Loans
The risks of a home equity loan exist, despite any benefits it may offer as an HVAC financing option.
Your home becomes collateral: This means that if you miss payments on the loan, the lender can foreclose on your home. Therefore, the financial risks are higher.
Slower funding and higher closing costs: Funding for a home equity loan can take a while. Many lenders require a new appraisal and underwriting and add many of the same upfront fees as a regular mortgage loan for this HVAC financing option.
Equity is required: If you've just bought your home or haven't paid on the loan for long, you likely won't meet the equity requirements for a home equity loan.
Risk of falling property value: Home values can fluctuate wildly over time. Even if you qualify for a home equity loan, there's always the chance that the value of your home and property can fall, and you can owe more on your home than it's worth, so there is some risk for this HVAC financing option.
Best Use Cases for Home Equity Loans
Home equity loans work best as an HVAC financing option when:
- You own your home outright or have significant equity.
- The HVAC project is planned and isn't urgent.
- You want the lowest possible interest rate.
- You need more predictability in your monthly payment.
Option 2: Unsecured Personal Loans as an HVAC Financing Option
A personal loan can be a fast and flexible solution for upgrading or purchasing a new HVAC system. They're also one of the fastest-growing HVAC financing options today.
How unsecured HVAC financing options work:
- No collateral is required.
- Credit approval is based on credit and income.
- Funds are deposited directly into your account.
- Many HVAC financing companies partner with lenders to streamline the process.
Pros of Unsecured Personal Loans
Personal loans for HVAC systems offer several advantages over home equity loans.
Speed and simplicity: The application process for a personal loan is usually faster than with a home equity loan. This makes it ideal for emergency HVAC repairs.
No collateral risk to your home: With a personal loan, there's less risk of losing your home.
No property documentation: A personal loan doesn't require property documentation or a new appraisal, as a home equity loan does.
Flexible use: Personal loans have more flexible use cases. They can cover HVAC, plumbing, ductwork, and even electrical upgrades.
Cons of Unsecured Personal Loans
A personal loan can sometimes trade convenience for cost.
Higher interest rates: Rates on a personal loan are typically higher than you would have with a home equity loan.
Credit score impacts pricing: The lower your credit score, the higher the interest rate on a personal loan.
Shorter terms: The typical terms on a personal loan can range from two to seven years, with five years being the average amount of time you'll have to pay off the loan. Because you have less time to pay off the loan, the monthly payments are usually higher.
Lower borrowing limits: Most borrowers have a lower borrowing limit with a personal loan, so you may not receive enough funding to cover a higher-end residential HVAC or large commercial system.
Best Use Cases for Unsecured Personal Loans
Unsecured personal loans are best when:
- Repairs are urgent.
- You don't want to put your home up as collateral and risk losing it.
- You lack enough equity to qualify for a home equity loan.
- Speed of funding is more important than interest savings.
Alternative HVAC Financing Options
Beyond traditional loans, borrowers today have more choices than ever. Instead of applying for home equity financing or personal loans, many homeowners and small business owners seek financing from alternative means.
Alternative HVAC financing options include:
Contractor-arranged financing or HVAC companies: Some have financing offers or even rebates to bring the cost of your HVAC unit lower.
Promotional financing: This includes 0% introductory interest rates through credit card companies.
Short-term installment loans: With a short-term loan, you'll get the loan amount upfront and pay equal monthly installments until the loan is paid off.
Equipment financing: An equipment loan can help pay for equipment assets, including HVAC and plumbing systems.
Lines of credit: A line of credit provides you with an approved credit limit you can borrow from. You pay interest only on the amount borrowed.
Revenue-based financing (for businesses): This HVAC financing option has become very popular with small business owners. Repayment is based on a percentage of future invoices.
Some of these HVAC financing options may work better for borrowers who are unable to qualify for a personal loan or home equity financing.
Tips for Getting Approved for These HVAC Financing Options
The key to loan approval is often achieved through adequate preparation. You can improve your eligibility by doing the following:
Check your credit report.
Pay down existing debt.
Compare multiple HVAC financing companies.
Most lenders prefer a credit score of at least 680 for a home equity loan and 700 or higher for an unsecured personal loan, though this ranges from lender to lender.
Look for mistakes on your credit report and dispute any errors, as it can potentially lead to a higher score. You'll get the best terms and interest rates with a higher credit score.
Some types of alternative HVAC financing options have underwriting criteria that allow for loan approvals with lower credit scores. However, you'll usually have a higher interest rate and have a higher overall loan cost.
Another factor is lenders look at is your debt-to-income ratio. Lenders usually prefer a lower ratio. If you can pay down existing debt before applying for a loan, it can work in your favor.
The old way of borrowing money meant going to the bank. However, the market has changed, and many buyers today prefer doing business digitally with alternative lenders.
Alternative lenders are more flexible with underwriting requirements, often approving borrowers with less than stellar credit and having more options tailored to a borrower's needs.
Look at several lenders before deciding which payment plan is best for you. It's also wise to see which ones charge a prepayment penalty if you pay the loan off early.
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FAQs About HVAC Financing Options
1. What can an HVAC loan cover?
Most HVAC financing options will pay for HVAC installation, furnaces, heating components such as heat pumps and boilers, ducts and ventilation systems, and air conditioning and cooling systems, including the compressor, condenser, evaporator coils, refrigerant lines, and more.
2. What are some non-financial considerations of purchasing an HVAC unit?
Look for an energy-efficient HVAC system that has a generous warranty and the functions you need, whether for new heating or an air conditioner. It also makes sense to choose one that meets eligibility to receive a tax credit.
3. Is there such a thing as no-credit HVAC financing options?
It is possible to get no-credit HVAC financing through lease-to-own HVAC companies and specialized online lenders who determine eligibility through alternative means, such as reviewing income, transaction histories, or vendor and customer relationships.
4. Which HVAC financing option is fastest?
Alternative lenders found online usually offer the fastest financing, sometimes within a day or two. Personal loans are usually faster than home equity loans, while a business line of credit or revenue-based financing also offers fast funding decisions.
5. Which HVAC financing companies are best?
If you have perfect credit and an established relationship with a bank, and you don't have an immediate need for financing, a bank loan can work well. But many borrowers today have more immediate needs and imperfect credit. These borrowers benefit from HVAC financing companies that will meet their needs the easiest and fastest.