Choosing between a Loan or a Special Assessment

May 30, 2021

Choosing between a Loan or a Special Assessment 

With over 58% of homeowners residing in HOAs, deciding on a loan or a special assessment for HOA funding is a popular question in the United States. HOAs are often found to encounter unprecedented situations where they need to allocate funds for repairing, replacing, or maintaining shared facilities within the property premises. Ideally, this money should come from the HOA’s reserve funds. 

However, when reserve funds are not plentiful, HOA boards have to arrange for the money through a bank loan or a special assessment from homeowners. 

The need for additional funds for your HOA may be a consequence of poor budget allocation. Not having a well-planned budget up to date with rising costs can be detrimental to your community’s overall prosperity. You can have a tough time securing a loan from the bank, or when seeking funds for a special assessment, you may face a backlash from homeowners who are already paying a hefty amount in maintenance and membership fees. 

We can help you manage your residential community’s financial problems successfully. 

Difference Between Loan and Special Assessment 

A special assessment or a bank loan are the two financial tools available to your HOA Board when there is a lack of funds. Take an informed decision based on your facts and circumstances when choosing between both. 

Special Assessments

Special Assessment is an amount collected from homeowners collectively to build the budget to repair or build common areas within your association that your insurance does not cover. The funds collected for this purpose are not to benefit any individual homeowner but for the entire community. That is why homeowners are sometimes reluctant to pay for special assessments. 

Special assessments cannot be planned prematurely; they are fixed based on the demands of a particular project. Homeowners usually pay through monthly installments, on completing project milestones or sometimes even in the form of a one-time payment. 

Special assessments are relatively harder to execute as they are only sanctioned after a vote from the community. They also burden homeowners with having to pay a significant amount within a short period. This might harm the reputation of your HOA. 

However, special assessments ensure that once funds are raised, a project is completed at one go without unnecessary delays. 


Bank loans are an excellent way to arrange for funds to complete a project within your community. When the budget is severely underfunded and exorbitant to ask for a special assessment, taking a loan is your best option. 

Unlike special assessments, bank loans can be paid back over several years. Most homeowners prefer this over having to pay a hefty sum upfront. Taking loans also masks the structural gaps in your association’s operations when there is underfunding and helps keep your community’s reputation intact to new buyers. 

However, bank loans may have high-interest rates at times. It can even get hard to meet all the requirements necessary for securing a bank loan. It is advised that you take the help of an association management company like CMA for this purpose. 

What should you choose?

Whether you should go for a special assessment or a bank loan to bridge the underfunding depends on the kind of project at hand. If it is a quick and small task that requires a basic amount, go for a special assessment. If it is a size-able infrastructural investment that would need homeowners to pay thousands of dollars, you should opt for a bank loan.