Using a Personal Loan to Buy an Outdoor Shed

The end of the summer can be a great time of year for building an outdoor shed. The weather is still nice, and you might need a place to store things like lawn care tools over the winter months.

Sheds, however, can be surprisingly expensive. So you might need to find outside financing to cover the cost of buying an outdoor shed.

Costs Involved in Buying and Building an Outdoor Shed

The average cost for an outdoor shed is about $3,000. Depending on the size, materials, and finishing, costs can range from about $500 to $4,500, according to HomeAdvisor. The total cost of building a shed includes leveling and preparing the ground or foundation of the shed, materials, tools, and labor costs if you are not going to build the shed yourself.

Personal Loans for an Outdoor Shed

Since personal loans can be used for almost anything, they are one of the most common ways that homeowners finance the purchase of an outdoor shed.

A personal loan is usually an unsecured loan, which means that there is not an asset serving as collateral to the lender. As a result, interest rates on personal loans are higher than they are on other, secured loans like home equity loans. They are, however, usually much cheaper than the average interest rate on a credit card.

The rates and terms on personal loans can vary a lot among lenders, so it is important to do your research and shop around to find the right loan for you. Interest rates can range from around 5% to 36% APR, and loan maturities can range from two to seven years. Lenders evaluate your loan application based on a number of factors, but your credit score is the most important indicator of whether or not you will be approved for a personal loan.

If you have a credit score of 720 or higher, you shouldn’t have a hard time getting approved for a personal loan with competitive terms. Without a good credit score, however, you will have to look harder to find a lender willing to give you a personal loan.

As you narrow down your list of potential lenders, look at how the interest rate and loan maturity affect your monthly loan payment. Also, don’t forget to consider the cost of the lender’s origination fees, which can range from 0% to 7% of the loan amount.

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Other Methods of Financing a Shed

If the interest on a personal loan seems too expensive, a home equity loan or home equity line of credit (HELOC) might be other options for financing your shed. Both the home equity loan and HELOC let you borrow against the amount of equity you currently have in your home.

Since your home serves as collateral for the loan or line of credit, lenders consider these loans to be less risky and charge lower interest rates than they do on personal loans. So your monthly payment could be lower than it would with a personal loan.

On the other hand, lenders also charge relatively high origination fees on a home equity loan or HELOC that can range from 2% to 5% of the loan amount. Having your home serve as the collateral also means that the lender can foreclose on your home if you can’t make the loan payments for your shed.

Saving your money and buying the shed outright can be the most affordable option. You only pay for the cost of the shed rather than paying hundreds to thousands of extra dollars in origination fees and interest. Although you may want the shed now, you’ll save a lot of money in the long run by waiting a few months to save the cash.

Alternatively, you might be able to get a line of credit from the shed manufacturer. Some offer 0% interest as long as you pay off the entire amount within a few months. If you get an offer like this, however, it is important to make sure you pay the entire balance in time to avoid interest charges going back to the date of purchase. A line of credit from a manufacturer usually has interest rates that are in line with credit card interest rates.

Consider the Overall Costs

If you are thinking about building an outdoor shed, you’ll find many options. Some sheds are small and utilitarian, while others are large enough to double as a living space. The cost can thus range from a few hundred dollars to many thousands of dollars.

There are, however, several options to help you finance your new shed. Which of those options is right for you depends on your personal financial situation and the total cost of the shed. Research all of the costs associated with each option before you make your decision.

Sources:
https://www.homeadvisor.com/cost/additions-and-remodels/build-a-barn-shed-or-playhouse/
https://go.hfcu.org/blog/bid/145356/home-equity-faqs-what-are-your-closing-costs
https://www.discover.com/home-equity-loans/blog/loan-closing-process/
https://www.shedsusa.com/company/financing