How to finance the cost of heat pump installation

Heat pumps can offer significant energy savings, potentially reducing the amount of electricity you use to heat your home by as much as 75%, according to the U.S. Department of Energy. The downside is the upfront cost that This Old House noted can range from $8,000 to $15,000 for whole-house installations.

Financing the cost of a heat pump can be an issue for homeowners who want to make this kind of upgrade. There are several options available to help homeowners spread out the cost and make a heat pump installation easier to fit into their budget. This guide will help you determine if a heat pump is right for your house and breaks down financing strategies, including home improvement loans.

Types of loans available for heat pumps

To finance a heat pump installation, you have two main options: unsecured personal loans and secured loans, such as home equity loans or home equity lines of credit (HELOC).

Secured vs. unsecured loans

A secured loan is one backed by collateral. This means that if you default on the loan, the lender can seize the collateral. Since home equity loans and HELOCs are secured by your home equity, the lender can foreclose on your home to mitigate their losses should you default.

An unsecured loan, by contrast, doesn’t require any collateral. Instead, lenders try to minimize the extra risk by having stricter borrowing requirements across credit scores, debt-to-income (DTI) ratios, and other borrowing factors. Personal loans are a type of unsecured loan.

Determining your financial needs

Before exploring your financing options, determine your financial needs and the full cost of installing a heat pump by getting multiple bids or estimates. You may want to budget slightly higher than the estimate you select to account for unanticipated additional costs.

Estimating average costs of heat pump installation

The cost of installing a heat pump can vary widely. However, you can generally expect to spend an average of $8,000 – $15,000. To get the best deal, request bids from multiple contractors. This will help you understand the full cost range and find a contractor that fits your budget.

When requesting bids, make sure they include the total cost of the project and information on project timelines, any warranties, and the products and materials to be used. Remember that the lowest bid may not be the best option, especially if the product or workmanship is of poor quality. That’s why you should always research the reputation of companies and contractors.

Once you understand the total cost of installing a new heat pump system, you can start researching lenders and financing options.  

Exploring different lenders and financing options

Fortunately, there are several ways to finance your heat pump installation. Explore each of them and their unique benefits and drawbacks.

HVAC companies offering financing

Many HVAC companies offer in-house financing, facilitated by partnerships with third-party lenders. These programs can take the form of installment plans, rent-to-own programs, or custom programs designed for HVAC customers.

Before choosing this financing route, consider all the terms and conditions. Keep in mind that you may face higher interest rates and steeper fees and penalties than traditional financing.

In addition, HVAC companies may offer 0% APR programs for a promotional period. If so, you must pay attention to when these promotions end and plan to pay down (or pay off) your balance before high-rate interest starts accruing.

Online lenders for personal loans

Personal loans from online lenders are unsecured loans that let you use the loan funds however you want. For example, Rocket Loans offers personal loans from $2,000 – $45,000 with either 36-month or 60-month terms. As with many personal loans, these loans have fixed interest rates, meaning the interest rate and monthly payments stay the same over the life of the loan.¹

Since personal loans are unsecured, they often come with strict terms. If your credit and debt-to-income ratio (DTI) don’t meet these conditions, your personal loan may not be approved for the amount you need, or at all.  Lenders look at your overall financial picture when determining how much of a personal loan you can get, so it’s good to review your credit before applying.

Home equity loans and HELOCs

You can also fund your heat pump installation with a home equity loan or HELOC, both of which are secured by your home equity. Consequently, they have specific loan-to-value (LTV) requirements to ensure you have enough equity to back the loan amount. This is on top of creditworthiness, DTI, and other borrowing criteria.

Keep in mind that lenders pay home equity loan funds in one lump sum at closing, while HELOCs are lines of credit, from which you can borrow as much or as little as needed up to a credit limit. Furthermore, this must be done within a designated draw period, after which the repayment period begins, and you must repay the loan balance.

Application process for personal loans

To get a personal loan, you must apply with the necessary documentation.

Steps to apply for a personal loan

Here are the steps to apply for a personal loan:

• Review your credit report: Your credit report may reveal past borrowing challenges that could impede loan approval. More importantly, if you spot any mistakes, you can request that they be corrected. You can get a free copy of your credit report from the credit reporting bureaus every year.
• Get prequalified: Many lenders can pre-qualify you for a loan based on your self-reported financial information. This gives you a better sense of your budget and potential loan terms. However, it’s only an estimate, not a loan guarantee.
• Complete a loan application with the best lenders: Apply for a personal loan from your top lender choices and submit the necessary documents. This may trigger a hard credit inquiry, which could lead to a slight and temporary credit score drop. However, multiple inquiries are expected when loan shopping and won’t significantly hurt your credit.
• Read the terms and conditions carefully: The loan’s terms and conditions lay out the cost of monthly payments, interest, origination fees, any prepayment penalties, and more. Make sure you understand them so you can compare loan offers.
• Accept the best loan offer: Choose the loan that best aligns with your needs and goals. Once it’s approved, you can collect loan funds to pay for the heat pump installation. Some lenders, like Rocket Loans, even offer same-day loan funding.

Documentation needed for loan approval

Most lenders require you to submit the following loan documents with your application:

• Proof of identity (driver’s license or other ID)
• Proof of income (pay stubs, bank statements, tax returns, Social Security benefits statement)
• Proof of address (utility bill, mortgage statement, or bank statement can be used)

Since this is sensitive information, only work with lenders who offer a secure portal for submitting documents. Also avoid submitting personal information via a public wireless network, which could be compromised.

Leveraging government incentives and rebates

To make your heat pump installation or upgrade even more affordable, explore energy-efficient programs and rebates.

Eligibility for energy-efficient upgrades programs

Programs and rebates for energy-efficient home improvements may be available via local utility companies, state programs, and even local resources. While many federal programs for energy-efficient credits expired at the end of 2025, local and state programs may still be available. Research programs and rebates in your area online or via your utility company.

How rebates can offset costs

Energy-efficient rebates offset the cost of a home improvement project by giving you money back after its completion. To find rebates, visit the ENERGY STAR website and enter your zip code into its rebate finder tool. 

The bottom line: A personal loan can help improve heat pump affordability

Heat pumps may be an energy efficient solution for homeowners, but they come with a high upfront cost. Financing a heat pump installation with a personal loan can let you spread its upfront cost over regular monthly payments. You can also explore available rebates and incentive programs, which can significantly lower your out-of-pocket expenses.

If you’re ready to see what you can qualify for, you can reach out to Rocket Loans and find out more about home improvement personal loans today.

¹ All personal loans are made by Cross River Bank, a New Jersey state chartered commercial bank, Member FDIC, Equal Housing Lender. All loans are unsecured, fully amortizing personal loans. Eligibility for a loan is not guaranteed. This is not a deposit product. Please refer to our Disclosures and Licenses page for state-required disclosures, licenses, and lending restrictions.

Borrower must be a U.S. citizen or permanent U.S. resident alien at least 18 years of age. All loan applications are subject to credit review and approval. Offered loan terms depend upon your credit profile, requested amount, requested loan term, credit usage, credit history and other factors. Not all borrowers receive the lowest interest rate. To qualify for the lowest rate, you must have excellent credit, meet certain conditions, and select autopay. Rates and Terms are subject to change at any time without notice.