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Maybe the asphalt on your driveway is starting to break apart and is more rocky than you’d like. Or perhaps you desire a fresh look and smoother experience going down your driveway.

Whatever the reason, giving your driveway a makeover can add to your home’s overall aesthetic and boost its functionality. Research reveals that 79% of Realtors thought a home’s curb appeal was essential to attracting potential buyers.

That said, driveway paving comes with a hefty price tag. According to estimates from HomeAdvisor, the cost depends on the size and materials, but can be anywhere from $2,000 to $10,000, with $6,000 being the average.

Can you finance a driveway if you don’t have the cash on hand to cover the costs? The good news is yes, it’s entirely possible. In order to figure out the best choice for you, you’ll want to be clued in on your options. Here, we’ll walk you through different ways to pay for a new driveway.

Understanding the Cost of Driveway Paving

Tracking home improvement costs? As mentioned, the average cost of driveway paving is $6,000. The main factors that determine how much you’ll be doling out are the size of your driveway and the type of material you’ll be using. As you might expect, different materials require a different investment of time and labor to install.

For instance, while gravel driveways are the least expensive to install, you’ll need to periodically replenish the gravel — ideally, every few years. On the flip side, driveways made of paved stone have the highest costs initially but can last the longest.

Recommended: Personal Loan Guide

Personal Loans for Driveway Financing

Personal loans can be a relatively easy route to financing a driveway paving. Most personal loan amounts range from a few hundred dollars to up to $50,000, while a few lenders have up to $100,000 available.

The terms of the loan repayment can be anywhere from one to seven years, and the APR, which is typically fixed, ranges between 8% and 36%. As of August 2024, the average interest rate on a 24-month personal loan hovered around 12.33%.

Personal loans usually have lower interest rates than credit cards, but the interest can make for an expensive way to borrow. Plus, there might be upfront fees, such as an origination fee, which is usually anywhere from 1% to 6% of your loan amount, and in some cases as high as 10%. While longer loan terms can mean lower monthly payments, you’ll be paying more interest for the loan.

Some lenders feature preapproval online and can offer a speedy application process that you can also do online. Once you’ve been approved for a personal loan, you may be able to receive the proceeds of the loan as soon as within one business day.

However, you should be aware that a personal loan for home improvement is an installment loan, which means you’ll receive the funds upfront and are responsible for making monthly payments from the start. When you apply, lenders do a hard pull on your credit, negatively impacting your credit score.

Home Equity Loans and HELOCs

If you’re a homeowner, you can borrow against the equity in your home to take out a home equity loan or home equity line of credit (HELOC) to finance a driveway paving. Both are second types of mortgage, so you’re betting against your house. Home equity loans and HELOCs can be good ways to borrow money for a relatively low interest rate and lower fees.

Currently, the average interest rate on a home equity loan is 8.35%, and the average national interest rate on a HELOC is 8.69%.

Like a personal loan, a home equity loan is an installment loan, so you’ll receive the proceeds for the loan in a single lump sum. From there, you’ll have a fixed monthly payment for which you’re on the hook.

A HELOC is a type of revolving loan. Like a credit card, you’ll be approved for a limit and borrow as you need, up to the limit, for the draw period, which usually lasts 10 years. You pay as you go, and might be able to make interest-only payments during the draw period. Because a HELOC lets you borrow funds as needed, it could be a better fit for ongoing or multiple home improvement projects with an undetermined total price tag.

Unlike unsecured forms of credit, home equity loans and HELOCs can be easier to approve. That said, both types of loans require a hard pull of your credit, which may temporarily bring down your credit score by a few points. And because you’re putting up your home as collateral, if you put a halt on your payments, you risk foreclosure and losing your home.

Recommended: The Top Home Improvements to Increase Your Home’s Value

Contractor Financing and Payment Plans

Another option for financing driveway paving is to borrow directly from a contractor. Some contractors partner with a third-party lender that provides financing options. These may include same-as-cash options (which we’ll get to in a bit) or monthly payments that you pay back over the length of the loan.

The pluses of getting financing from a contractor are that it’s convenient and straightforward. The contractor may be able to offer you a flexible plan to meet your needs in financing for driveway paving. The approval process might also be quicker.

However, minuses of contractor financing may include higher interest rates. Plus, you’re tied to the contractor should issues arise during the project.

Credit Cards and Same-as-Cash Options

You can also use a credit card. If you don’t want to jump through the hoops of applying for a new home improvement loan and have a hard pull on your credit, you could use a credit card to finance a new driveway.

That said, credit cards typically have higher interest rates than other types of financing, which ratchet up the costs of your home improvement project. Currently, the average interest rate for credit cards is 21.76%.

Contractors may also offer a “same-as-cash” option. Also known as deferred interest financing, these loans feature a no-interest period, usually between three and six months. However, interest will accrue if you don’t pay off your balance when the promotional period ends. Typical interest rates on “same-as-cash” offers range between 25% to 30%, which makes for an expensive purchase.

If you’re considering the same-as-cash option, you might also want to mull over a zero-balance transfer credit card. Interest also doesn’t accrue on purchases until the end of the promotional period, and these credit cards have zero-interest periods that are up to 20 months, so you could have more time to pay it off.

The Takeaway

Figuring out the best option for financing a driveway improvement means knowing what’s available and weighing the pros and cons of each. Before deciding, estimate how much you anticipate spending on your driveway financing and then pore over your options.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

How much does driveway paving typically cost?

It depends on the size of your driveway and the materials used, but driveway paving typically costs anywhere from $2,000 to $10,000, with an average cost of $6,000.

Can I use a home improvement loan for driveway paving?

You can use a home improvement loan for a driveway paving project. You’ll want to look for a loan with the amount needed plus the lowest terms and flexible rates possible.

Are there government programs for driveway improvement financing?

Government home repair assistance programs exist, and you’ll need to check if you qualify for a home improvement loan. Eligibility criteria may include income, age, location, property type, and if you belong to a specific group.

Further, single-family housing repair loans and grants can be available at the state, county, and city levels. You’ll need to check locally to see what’s out there and how to qualify for a loan or grant to spruce up your home.

Photo credit: iStock/irina88w

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SOPL-Q424-005

When investors evaluate which bonds to buy, they often take a look at yield to maturity (YTM), the total rate of return a bond will earn over its life, assuming it has made all interest payments and repaid the principal.

Calculating YTM can be complicated. Doing so takes into account a bond’s face value, current price, number of years to maturity and coupon, or interest payments. It also assumes that all interest payments are reinvested at a constant rate of return. With these figures in hand, they will be better equipped to understand the bond market and which bonds will offer the greatest yield if held to maturity.

What Is Yield to Maturity (YTM)?

The yield to maturity (YTM) is the estimated rate investors earn when holding a bond until it reaches maturity or full value. The YTM is stated as an annual rate and can differ from the stated coupon rate.

The calculations in the yield to maturity formula include the following factors:

•   Coupon rate: Also known as a bond’s interest rate, the coupon rate is the regular payment issuers pay bondholders for the right to borrow their money. The higher the coupon rate, the higher the yield.

•   Face value: A bond’s face value, or par value, is the amount paid to a bondholder at its maturity date.

•   Market price: A bond’s market price refers to how much an investor would have to pay for a bond on the open market currently. The price buyers pay on the secondary market may be higher or lower than a bond’s face value. The higher the price of the bond, the lower the yield.

•   Maturity date: The date when the issuer repays the principal is known as the maturity date.

The YTM formula assumes all coupon payments are made as scheduled, and most calculations assume interest will be reinvested.

How to Calculate Yield to Maturity

Calculating yield to maturity can be done by following a formula — but fair warning, it’s not simple arithmetic!

Yield to Maturity (YTM) Formula

To calculate yield to maturity, investors can use the following YTM formula:

In this calculation:

C = Interest or coupon payment
FV = Face value of the investment
PV = Present value or current price of the investment
t = Years it takes the investment to reach the full value or maturity

Example of YTM Calculation

Here’s an example of how to use the YTM formula.

Suppose there’s a bond with a market price of $800, a face value of $1,000, and a coupon value of $150. The bond will reach maturity in 10 years, with a coupon rate of about 14%.

By using this formula, the estimated yield to maturity would calculate as follows:

The Importance of Yield to Maturity

Knowing a bond’s YTM can help investors compare bonds with various maturity and coupon rates, and ultimately, what their dividend yield could look like. For example, consider two bonds of varying maturity: a five-year bond with a 3% YTM and a 10-year bond with a 2.5% YTM. Investor’s can easily see that the five-year bond is more valuable.

YTM is particularly useful when attempting to compare older bonds sold in a secondary market, which can be priced at a premium or discounted — meaning they cost more or less than the bond’s face value. Understanding the YTM formula also helps investors understand how market conditions can impact their portfolio based on the investment they select. Since yields rise when prices drop (and vice versa) as seen on a yield curve, investors can forecast how their investment will perform.

Additionally, YTM can help investors understand how likely they are to be affected by interest rate risk — the danger that the value of a bond may be adversely affected due to the changes in interest rate. Current YTM is inversely proportional to interest rate risk. That means, the higher the YTM, the less bond prices will be affected should interest rates change, in theory.

Yield to Maturity vs Yield to Call

With a callable, or redeemable bond, issuers can choose to repay the principal amount before the maturity date, halting interest payments early. This throws a bit of a wrench into the YTM calculation. Instead, investors may want to use a yield to call (YTC) calculation. To do so, they can use the YTM calculation, substituting the maturity date for the soonest possible call date.

Typically a bond issuer will call a bond only if it will result in a financial gain. For example, if the interest rate drops below a coupon rate, the issuer may decide to recall the bond to borrow funds at a lower rate. This situation is similar to when interest rates drop and homeowners refinance their home loans.

For investors that use callable bonds for income, yield to call is significant. Suppose the issuer decides to call the bond when the interest rates are lower than when the investor purchases it. If an investor decides to reinvest their payout, they may have a tough time finding a comparable bond that offers the yield they need to support their lifestyle. They may feel it necessary to take on more risk, looking to high-yield bonds.

💡 Quick Tip: It’s smart to invest in a range of assets so that you’re not overly reliant on any one company or market to do well. For example, by investing in different sectors you can add diversification to your portfolio, which may help mitigate some risk factors over time.

Yield to Maturity vs Coupon Rate

While a bond’s coupon rate is another important piece of information that investors need to keep in mind, it’s not the same as yield to maturity. The coupon rate tells investors the annual amount of interest that a bond’s owner is set to receive — the two may be the same when a bond is initially purchased, but will likely diverge over time due to changing economic and market conditions.

Limitations of Yield to Maturity

The yield to maturity calculation does have limitations.

Taxes

It’s important to note that YTM calculations exclude taxes. While some bonds, like municipal bonds and U.S. Treasury bonds, may be tax exempt on a federal and state level, most other bonds are taxable. In some cases, a tax-exempt bond may have a lower interest rate but ultimately offer a higher yield once taxes are factored in.

As an investor, it can be especially helpful to consider the after-tax yield rate of return. For example, suppose an investor in the 35% federal tax bracket who doesn’t pay state income taxes is considering investing in either Bond X or Bond Y. Bond X is a tax-exempt bond and pays a 4% interest rate, while Bond Y is taxable and pays 6% interest.

While the 4% yield for Bond X remains the same, the after-tax yield for Bond Y is 3.8%. While it seemed like the less lucrative of the two options up front, Bond X should ultimately yield a higher return after taxes.

Presuppositions

Another YTM limitation is that it makes assumptions about the future that may not necessarily come to fruition. Specifically, it assumes that a bondholder will hang on to the bond until its maturity date, which may or may not actually happen. It also assumes that profits from the investment will be reinvested in a uniform manner — again, that may or may not be the case.

The Takeaway

Using the yield to maturity formula can help investors compare bond options with different coupon and maturity rates, market and par values, and determine which one offers the potential for a higher yield. But calculating the YTM is not an exact science, especially when you’re gauging the return on a callable bond, say, or adding the impact of taxes to the mix.

YTM is just one tool investors can use to determine which bond may best serve their financial needs and goals. One alternative to choosing individual bonds is to invest in bond mutual funds or bond exchange-traded funds (ETFs). Investors can also speak with a financial professional for guidance.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

FAQ

What is a bond’s yield to maturity (YTM)?

A bond’s yield to maturity is the total return an investor can anticipate receiving if the bond is held to its maturity date. YTM calculations assume that all interest payments will be made by the issuer and reinvested by the bondholder at a constant rate of interest.

What is the difference between a bond’s coupon rate and its YTM?

A bond’s coupon, or interest, rate is fixed from the moment an investor buys it. However, the same bond’s YTM can fluctuate over time depending on the price paid for it and other interest prices available on the market. If YTM is lower than the coupon rate, it may indicate that the bond is being sold at a premium to its face value. If it’s lower, it may be that the bond is priced at a discount to face value.

What is yield to maturity and how is it calculated?

Yield to maturity refers to the total return an investor can expect or anticipate from a bond if they hold it to maturity. It’s calculated using variables including the time to maturity, a bond’s face value, its current price, and its coupon rate.

Why is yield to maturity important?

The yield to maturity formula can give investors an idea of what they can expect in terms of returns from their bond holdings. But again, there are some assumptions the calculation takes into account, so an investor’s mileage may vary.

Is a higher YTM better?

A higher YTM may be better under certain circumstances. For example, since a higher YTM may indicate a bond is being sold for less than its face value, it may represent a valuable opportunity to invest. However, if the bond is discounted because the company that offered it is in trouble or interest rates offered by other investments are more appealing, then a high YTM might not be such a good thing. Investors must research investments carefully and understand the full story before they buy.