Can an HOA borrow money or take out a loan?
Reviewed by the OurHOA team · Updated June 2026
Whether an HOA can take out a bank loan, how association loans are secured by future assessments, when a member vote is required, and how boards weigh borrowing against a special assessment.
Yes - most HOAs can borrow, within limits
An HOA is usually a nonprofit corporation, and like other corporations it generally has the power to borrow money - take out a bank loan or a line of credit to fund a large project. Boards most often turn to a loan for a big-ticket capital need: a full roof replacement across every building, repaving all the roads, a major clubhouse renovation, or an emergency repair that reserves can't fully cover. Borrowing lets the association do the work now and spread the cost over several years, instead of demanding the entire sum from owners at once. But the power to borrow isn't unconditional - it's shaped by the governing documents and, in many cases, a required owner vote.
How an association loan is actually secured
This is the part owners most often misunderstand. An HOA loan is not a mortgage on anyone's individual home. Instead, the lender's security is almost always an assignment of the association's future assessment income - the right to collect dues - and sometimes the association's operating or reserve accounts. In practice the board commits to levy and collect enough in assessments to cover the loan payments, and the bank's collateral is that stream of dues, not your house. That's why lenders underwriting an HOA loan look hard at the community's delinquency rate, reserve health, and assessment-collection history: the loan is only as good as the association's ability to keep collecting from owners.
When you need a member vote
Whether the board can borrow on its own or must ask the owners depends entirely on the governing documents and state law - and this is the threshold to check before anything else. Many CC&Rs and bylaws require approval by a percentage of the membership before the association can incur debt above a certain size, encumber association property, or pledge future assessments as collateral. Some state statutes add their own requirements. Even where a vote isn't strictly required, a large loan that will drive an assessment increase often runs into the same member-approval thresholds that govern raising dues or levying special assessments - in California, for instance, the limits on how much a board can increase regular assessments or impose a special assessment without a vote (Cal. Civ. Code 5605) can effectively force a member vote on the repayment. Read the 'borrowing,' 'indebtedness,' and 'assessment' sections of your documents to find the exact threshold.
Loan vs. special assessment: the real trade-off
When a community faces a major cost, the board is usually choosing between borrowing it and special-assessing it - and each has a different burden. A special assessment raises the full amount immediately and avoids interest, but it can hit owners with a large lump sum many can't easily pay, sometimes forcing hardship or sales (our guide on special assessments covers that side). A loan converts that lump sum into smaller payments folded into dues over years, which is gentler on household budgets but adds interest cost and locks the association into a multi-year obligation. Loans also spread the cost more fairly across time when ownership turns over - new owners who benefit from the new roof help pay for it, rather than the cost landing entirely on whoever owned on assessment day. There's no universally right answer; it depends on the size of the project and the community's finances.
What a careful board checks before borrowing
Before signing, a prudent board confirms it actually has the authority (documents and any required vote), shops the loan terms (rate, term, fees, prepayment penalties, and any covenants the lender imposes on reserves or assessment increases), and builds a concrete repayment plan - usually a dedicated assessment line item sized to cover the payments with margin. It also weighs what happens if delinquencies rise: because the loan is repaid from assessments, a spike in non-payment can squeeze the association's ability to make its loan payments, so collection discipline matters more than ever once there's a loan to service. Getting the association's attorney and CPA to review the loan documents is standard practice, not overkill - the commitment runs for years.
How OurHOA helps
A lender deciding whether to make an HOA loan - and a board deciding whether it can afford one - both need the same thing: a clear, current picture of assessment income, delinquencies, and reserves. OurHOA gives a self-managed community one organized place to track dues collection, see its delinquency rate, and keep its budget and reserve balance in view, which is exactly the financial record a board needs to evaluate a loan responsibly and a bank wants to see before approving one. Strong, transparent collections also protect the community's ability to repay. OurHOA is software for keeping a community's finances organized, not a lender, a law firm, or a financial advisor - for the borrowing authority and member-vote thresholds that bind your association, read your governing documents and your state's HOA statute, and have the loan reviewed by your association's attorney and accountant.
OurHOA is the friendly, affordable way self-managed communities keep dues, records, and reminders in one place. See how it works.
These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.