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?
- No Annual Fee
- Interest Free Options
- Credit lines up to $40000
- 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 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.|
Check out our review of the Home Depot Consumer Credit Card,
or see other Home Depot cards for contractors:
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.