HVAC Financing Facts

Financing your new AC or heating equipment

HVAC Financing Facts

No one wants to hear those fateful words, “It’s time to replace your central heating or cooling system.” Sooner or later, no matter how long your equipment has been running, your heating and cooling system will need to be replaced. But when that time comes, your wallet may not be ready! That’s where financing can help keep you comfortable!

What is HVAC Financing?

HVAC financing helps spread the cost of new equipment or entire systems over a predetermined amount of time. Why dip into savings you may have earmarked for another purpose, add to an existing credit card balance or even consider a home equity line of credit? HVAC financing can be an effective means to fit a replacement system or equipment into your budget without breaking the bank.

It is important to review financing details to make sure you understand your financial responsibility. You should review the interest rate, repayment terms and the “small print” in any potential financing contract.

Smart Money Management

Base your buying decision on long-term comfort and energy-efficiency. Don’t lose your cool over the initial sticker cost, or freeze up at the suggestion of a new high efficiency rated system. Enhanced energy savings can result in real, tangible returns when you invest in a high-efficiency system, especially when compared to your old unit or today’s base-efficiency units.

A high-efficient system can also allow you to feel the difference compared to your old unit. Impactful innovations such as variable-speed fans, variable-speed compressor and heat exchanger technology have ushered in a new era of HVAC operation that enhances indoor comfort and performance.

While your frugal urges may tempt you to opt for a base or minimum efficiency system, the least expensive option may not be the most cost effective solution considering the life cycle of a new, energy efficient system. High-efficient systems can realize uncompromised indoor comfort throughout your home, offer reoccurring savings on your monthly utility bill, and possibly increase the value of your home. Moreover, consumer financing can often cover the cost of an extended service plan. Extended service plans may minimize additional out of pocket expenses you face for the term of the service plan.

What Do I Need for HVAC Financing Approval?

Depending on the local contractor’s financing company, you may need to provide personal information and be subject to a credit check. Ask the dealer to provide complete information before you make a decision.

“Each lender differs in what is required for a loan approval,” says Erin McCollum, Director of Contractor Services for EGIA. According to McCollum, typical customers who are approved for an HVAC loan may have:

  • Fair to excellent credit profiles
  • Debt to income ratio under 50%
  • No recent history of bankruptcies

Common Financing Terminology1

  • APR (Annual Percentage Rate) - The interest charged on the loan
  • Debt to Income Ratio - The amount of a borrower's debt divided by their income
  • Equal Monthly Payments at 0% APR - A loan that is paid in equal monthly payments over a specific term with an APR of 0%
  • Fixed Interest Rate - A fixed percentage of interest that is paid over the loan term
  • Interest - Payment for the use of money over time or the amount a borrower pays to borrow money from the lender
  • No Interest, No Payment Loan - A loan in which no payments need to be made within a specific promotional time period.  If the balance is not paid at the end of the promotion period, the borrower usually pays off the interest from the loan start.
  • Sub-Prime Loan - A loan given to a borrower who doesn't meet the credit requirements for a typical loan.  Sub-prime loans have higher interest rates because they finance borrowers who may have a poor credit history, low income, and high debt to income ratios
  • Term - The time length the loan will run
  • Unsecured Loan - A loan that is given and based on a borrower's credit instead of collateral


1 Terminology was provided by the Electric & Gas Industries Association (EGIA), a non-profit organization dedicated to advancing energy-efficiency and renewable energy solutions through the home improvement and renewable energy industries.