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With more than 40% of American homeowners not able to make an unexpected repair over $400, financing has become a vital part of the home service industry. As more companies join the space, it’s becoming more difficult to follow who can offer the best rates, who provides the most transparency, and who is most reliable. Home service financing also comes with several unusual variations, from lease-to-own on up to credit-line financing.
In this article, our Bickimer Electric service experts break down-home service financing, what options are available, and what to look out for when choosing your contractor and his finance partners.
TYPES OF FINANCING AVAILABLE
As financing services expand in the home service space, a number of different types have appeared to meet the needs of customers, the demands of contractors, and the credit risks involved for lenders:
These services are a loan, but operate as a line of credit. Lenders approve you for x amount of credit, and your repayment is determined by how much of that credit you use. The interest rates for these lines tend to be higher than standard loans and can come with or without early payment penalties.
These conventional loans are standard, credit-based loans that use your credit history and a “hard” hit on your credit, which impacts your credit score. Interest rates on these loans fluctuate based upon your risk profile.
These loans are income-based and require no “hard” credit hit that would affect your score. These loans tend to have the highest rate of interest because they can’t assess your risk based on credit history.
These loans involve a “soft” hit on your credit. Less detailed than a “hard” hit, soft hits provide basic information about loans and outstanding debts you may have. These records are used with your proof of income to determine your risk.
These loans are typically reserved for the heating and cooling space. Lease-to-own lenders only require income information to approve the purchase of basic units. Failure to complete the contract can result in the repossession of the installed unit.
These tend to have the highest interest rates. Companies offering in-house financing assume all the risk of the loan they offer, and qualifying criteria vary wildly.
WHAT’S MY CREDIT?
Most lenders will still look at your credit. Many use a “hard” hit, with detailed information about your complete credit history, what you owe, and payment records. Other lenders use “soft” hits, which provide more basic information about the amount of debt you own and your current bank balances. A hard hit impacts your credit score negatively, whereas a soft hit will not affect your credit score.
Credit scores range between 300-850. For loans that take credit into account, your score will significantly impact the interest rate and loan amount that you can be offered. As a general rule, 700+ is considered prime credit. 620-700 is deemed to be sub-prime, and anything below 619 is considered high risk.
DON’T LOSE HOPE
Whatever your current score, it’s important to remember that there may still be a financing option available to you. Make sure you discuss with your contractor the financing options they have available and what you may qualify for. If the contractor has a no-credit option or a soft-hit lender, it costs you nothing to at least apply.
HOW LONG FOR A DECISION?
How long it takes to receive a decision on your credit application depends entirely on the lender. If you’re getting a range of quotes from several contractors, it’s essential to make sure they have an instant or quick decision process. Many lenders can provide decisions either instantly, or in minutes, but some can require income verification, which can take 7-10 business days.
When you make your initial call to the contractor, you should make sure that you ask how their financing options work and how quickly you can get a decision.
Research, Research, Research!
When expensive repair issues rear their head, it’s challenging to make the right choice in finding a contractor who will deliver a quality, trustworthy service. This is made more difficult by trying to find a contractor able to offer other payment options.
When researching contractors in your area, it’s essential to check their website (if they have one). Make sure they have a financing page that describes what they can offer you. You should also look for examples of past projects, especially any that are similar to what you need.
Once you’ve narrowed down the list, call their offices and make sure you can easily get through to a real person, not a voicemail. If problems occur, it’s important that you’re able to speak to someone and not have to wait hours or days for a callback.
When speaking to the contractor’s office staff, ask about financing options, get details on what they offer, and how quickly they can make decisions. If they can, have them schedule a remote or virtual estimate to get some preliminary pricing before committing to a service call fee.
FINALLY
It’s never fun to need to take on the extra burden of debt. What’s important, though, is making sure that your home is safe for you and your family. Contractors who can offer easy application processes, instant decisions, and cater to a wide variety of credit needs are the best choice. Here at Bickimer Electric, we partner with Wisetack to offer a fantastic range of financing options. With a quick, customer-friendly application process, no hard hits on your credit, and instant decisions, it’s never been easier to finance your electrical needs with Bickimer.
For all your electrical needs, book your consultation today with our Bickimer Electric lighting experts at 913-313-6751, or book online using the handy buttons above. Be sure to ask about our outstanding financing options and instant decisions!
Proudly serving the Liberty and surrounding areas, Bickimer Electric is your number one Kansas City electrical specialist!
