Pros and Cons of The Home Depot Project Loan

Kimberly Rotter

Kimberly Rotter | Reviews

Mar 04, 2013

This post was updated November 6, 2014.

The Home Depot offers a Project Loan for consumers, among a number of other financing options.

The Home Depot Project Loan is a six-month line of credit (for your approved total loan amount) during which you can make large purchases of any product at a Home Depot store or on their website, or pay for their installation services. Is it a good deal?

As an alternative to store-branded cards, take a look at some general-purpose rewards cards, which often have 0% intro APR offers and cash back bonuses.

The Home Depot Project Loan

  • No Annual Fee
  • Interest Free Options
  • Credit lines up to $40000

Fair Credit
Required

  • Annual Fee: $0
  • Interest Rate: 7.99% APR
Quick Card Facts
  • Fixed 7.99% APR
  • 6 months to make all of your project purchases
  • 84 fixed monthly payments with flexibility to pay off anytime
  • Credit lines up to $40,000
  • No annual fee

The Offer

The Home Depot Project Loan is for projects that cost $2,500 or more.

The Home Depot will open a line of credit for the amount that you’re approved for, (up to $40,000); the borrower is then issued a special credit card to use for six months.

For the initial 6 months, interest-only payments are required. After the six months pass, no new charges may be added and fixed payments begin for a period of 84 months (seven years).

There is no annual fee, and the interest rate is fixed at 7.99%.

The Pros The Cons
No annual fee Must meet the $2,500 minimum requirement
Principal payments are waived during the six-month purchasing window. During the six-month purchasing window, the borrower must make interest-only payments on the outstanding balance. Purchases are limited to what the Home Depot offers. You can’t shop around and purchase materials from any other vendor with these funds.
No prepayment penalty for paying off the balance at any time prior to the end of the 84 months Payments must be made online or on the phone and cannot be made in the store. This is inconvenient since customers who take advantage of this loan are presumably in the store with some regularity.
Interest rate is competitive, and significantly lower than the rate on the Home Depot credit card Customer service needs improvement. This reviewer unhappily observed that the receipt for her telephone payment arrived on a postcard, revealing her name, address, loan balance and payment details. In this age of identity theft, many consumers would be similarly angered by such a breach of privacy.
Do-it-yourselfers will appreciate the opportunity to take control of the home improvement project and budget Payments may not be made with a credit or debit card. Consumers using this option give up the opportunity to earn rewards for these major purchases.

The Bottom Line

For borrowers who qualify, the relatively low interest rate makes this a competitive financing option. Some consumers will qualify for a personal loan or home equity loan that may offer a better rate and they should carefully weigh their options. The interest rate on personal loans from major banks is between 8 and 10.25% and the rate on HELOCs is 3.25 to 5% (as of Nov. 2014, for applicants with good or excellent credit).

In the past, this product offered 0% interest during the six-month purchasing window. That offer no longer applies, but approved applicants may still qualify for six months interest-free on some purchases under other promotions.

For comparison, Lowe’s currently offers 84 months to pay at a fixed rate of 5.99% to qualified applicants, on certain purchases. Lowe’s also offers 6 to 18 months interest-free on qualifying purchases.

For both stores, the interest-free offers are actually deferred interest. Failure to pay off a promotional balance during an interest-free period will incur interest charges on the entire balance, from the date of the transaction, including any portion of the balance that is already paid off.

  • Lori Brock

    This information is not totally accurate and, I believe, doesn’t paint an accurate picture. The current advertised rate for a Home Depot Project Loan is 7.9%. However, we recently got our loan for 5.9% when they were willing to match a major competitor’s rates. We needed new carpet very badly and were able to get it for an affordable price, and at what I consider a very reasonable rate. I’ve very thankful for the HD Project Loan, the rate we got, and for the fact that we have a full 84 months to pay it off; plus we have beautiful, new, very soft carpet (which the major competitor didn’t have)! Thank you, Home Depot!

    By the way, it makes sense that if the company is going to offer you a loan, you should only be able to buy from them. That’s the reason for offering the loan.

    • Janet Martin

      Lori, if you read this I would greatly appreciate if you could disclose who the major competitor was who was offering the 5.9% rate that got HD to lower their advertised 7,9% for you. We are looking at the HD Project Loan and would love to get them to lower the rate! Thank you!

      • Levelheadsteve

        Lowes.

        • Gae Xavier

          What I don’t get is, the front-loaded interest is paid before principle. So they loaned me $10k for 6 months. I will only end up needing about $3k for this project. Therefore, I’ll pay 7.9% interest on $10k for 6 months? Then what? I only owe $3K principle plus 7.9% for the duration. Or am I paying 7.9% on $10K available loan even though I’m only charging a $3K purchase?

          Please explain. Thank you!

          • Kimberly Rotter

            You will only pay interest on your actual charges.

        • Kimberly Rotter

          The problem with the Lowe’s offer is that I believe it applies to a single receipt. You don’t get six months to shop. It’s a one-time deal. Please correct me if I’m wrong.

          Also, both Lowe’s and Home Depot offer interest free promos ranging from six to 18 months. They are all deferred interest offers (so be careful).

    • Kimberly Rotter

      Thanks for your comments. Terms have changed several times since this post originally appeared, and we have updated the post with the most current details. The product has improved significantly and I’m glad it worked well for you.

      • Gae Xavier

        Thank you! For a new, all glass, insulated garage door with a WiFi, silent belt opener and install it was perfect. Getting a home equity loan is scary, since it ties up my home title if I were to need to sell ASAP.

        • Anonymous

          is this program based off of credit score or home equity ?

          • Kimberly Rotter

            Credit score.

          • Gae Xavier

            credit score

          • Gae Xavier

            I believe it was my credit score.

  • TommyJ

    So from what I’m reading… the 7th month thru XX term months are all the principal spread out.

    Months 1-6 are just interest. So, conceivably, couldn’t you wait until the end of the 5th month, purchase everything at once and only pay interest one time?

    • http://rotterwrites.com/ Kimberly Rotter

      Months 1-6 the customer is allowed to pay interest only (but can make additional payments against principal if desired). If you don’t make a purchase until the sixth month, no payment will be required in the first five months.

      Months 7-84 are “normal” payments, or in other words principal plus interest. At all times, interest is charged only on the actual outstanding balance (not on the credit limit).

      At any time during the time the account is open you can pay more than required. All extra payments are applied to unpaid principal, and the total interest charges will be lower as a result.

      The fixed payment amount assumes that you will take the full 84 months to pay off the loan. But if you prepay at all (a little at a time or in full at any time), the total cost of the loan will be lower and your bill will be adjusted accordingly. Your payments will not be changed, but you’ll shorten the life of the loan.

      Hope that helps.

  • Rhina Moloon

    Does anyone knows the minimal credit score to qualify for the HD project loan?

    • http://rotterwrites.com/ Kimberly Rotter

      Home Depot will not specify a minimum credit score to qualify. Their reps explain that consumer credit history is pulled from Experian, and they consider multiple factors when reviewing an application. Credit score is one factor. So are debt ratio, presence of collections, reason you need the loan, etc.

      Anecdotally, you will find people online who claim to have been approved with credit scores in the 640-660 range. Again, this range is not confirmed by HD.

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