A home improvement financing offer is a win-win for homeowners and contractors. Homeowners have the convenience of paying for their remodel or renovation projects through affordable monthly payments. Contractors have the advantage of receiving immediate funding upon the completion of their projects, which supports their cash flow. When it comes to financing programs, it’s important to provide value to both of these groups.
EXPECTATIONS FOR HOME IMPROVEMENT FINANCING
Contractors:
After you’ve discussed the scope of the home improvement project with the homeowner, you’ll need to provide them with an accurate estimate. Hopefully you’re using technology like mobile apps, tablets, iPads, etc. to provide these estimates while you’re still in the home of your customer. Providing simple and fast service will help you close more deals.
If the homeowner agrees to move forward with financing, you’ll need to help them fill out the correct application for the loan. Usually you can use a mobile app, online portal or even call-in these applications.
Once the lender receives the application, an underwriting system supported by a team of underwriters reviews their credit score and credit history. It’s important for lenders to take the credit history into account because it demonstrates whether your customers have consistently paid their debts with prior lenders. Within seconds or minutes, your submitted application will be approved or denied, which you can then convey to your customer.
If the application is approved, you can get started with their home improvement project! Once the job is finished, you will typically send in a Completion Certificate, signed by your customer, either electronically or by fax or email to initiate funding. Funding takes place by ACH directly into your account, usually within 24 hours.
Homeowners:
Before you can receive financing for your home improvement projects, you’ll need to meet with a contractor to determine the overall cost. After they provide you with an estimate, you’ll probably start calculating and estimating how much your monthly payments would cost. When you’re estimating your monthly payments, don’t forget to include the interest rates based on your expected credit scores.
Not all lenders view credit scores the same way, but here is a general range of credit scores you could anticipate:
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300-550: Deep Subprime (bad credit)
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551-660: Subprime (below average credit)
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661-780: Prime (average-good credit)
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781-850: Super Prime (excellent credit)
Now, the better your credit score… the better your interest rates will be. As a consumer, it’s critical to know the correct information so you can make sound financial decisions. The first step in that process is to be aware of your credit report and score. You can log in to AnnualCreditReport.com and check your reports for free once a year from each of the main credit bureaus (Experian, Equifax and TransUnion).
If you still want to move forward with one of the home improvement financing options, the contractor will contact the lending institution and provide your basic information. The lender will then check your credit score and view your credit history before approving or denying the application. If you get approved, you will be given all the information you need to start making monthly payment toward your home improvement project.
WHAT ARE THE SUPPORTED JOB TYPES?
Window Replacements
If a person’s windows are not opening properly, require regular maintenance or cleaning, don’t block heat or cold, allow in too much outside noise, or collect condensation… it may be time for new windows. Single-pane windows often leave rooms feeling cold and dry in cold weather and overheated during warmer months. Windows with double-pane glass can greatly improve the comfort of a home at an affordable cost, with home improvement financing.
Siding Replacements
Vinyl siding is the most common and affordable option for homebuyers. It requires very little maintenance, never needs to be painted and can easily be replaced if damaged. On average, homeowners who remodel with vinyl will recoup nearly 80% on the cost of the installation, thus increasing the value of the home.
Roof Replacements
Older roofing shingles and wood shakes typically have a 15 to 30-year lifespan, depending on the shingles’ quality and how well the roof was installed originally. If homeowners are experiencing curling shingles, leaking ceilings, cracked or discolored drywall, or loss of the asphalt granulation, it’s time to consider a roof replacement.
Kitchen Remodel
Improving the kitchen in a home can significantly increase the home’s value. Although the kitchen remodel could take 13-23 weeks to complete, it’s worth the investment of time and money. Affordable home improvement financing options make this a convenient choice to elevate a person’s standard of living.
Bath Remodel
Most bathroom remodels include removing the bathtub and/or shower, in addition to replacing the toilet, vanity and flooring. Contractors can help homeowners design the bathroom and navigate the details involved with updating a bathroom’s floor plan, cabinet style, counter top options, tile flooring options, lighting ideas and more.
Basement Remodel
Whether a homeowner needs to get rid of mold or upgrade an old-fashioned floor plan, basement remodels are becoming more popular. If you want to add space to your home, basement remodeling is the simplest and least expensive way to go (especially with home improvement financing options).
HVAC Replacement or Installation
Having access to heating and cooling is more of a necessity than a luxury. Although the price of replacements or installations vary depending on makes, models and customer needs, price can be determined through an evaluation of the home and existing equipment. If it’s out of the customer’s immediate cash price range, home improvement financing options are a great alternative.
Solar PV Installation
When a homeowner installs a solar energy system on the property, it saves money on electricity bills and protects against rising electricity rates in the future. It’s important to assess the home and see if it can take advantage of nice, sunny weather. Offering financing options upfront will help motivate customers to complete the purchase.
TECHNOLOGY IN THE HOME IMPROVEMENT INDUSTRY
Technology has become a critical component for contractors to provide a positive customer experience. Phones, iPads and tablets can now price the job on the spot, and also show how the finished product will look on the house. Many of the latest initiatives in home improvement financing have been to create the best mobile apps for contractor salespeople.
Through a financing mobile app, contractors can easily submit applications, receive approvals (often instantly), satisfy stipulations, and send loan documents for signatures. This all-in-one format makes it much easier for contractor salespeople to close more deals to increase revenue.
Using technology can also soften the blow of the total cost of the home improvement project. Instead of leaving a big quote with a customer, make sure to explain the payment options upfront to make the cost seem less intimidating.
PROS AND CONS OF SAME-AS-CASH FINANCING
Same-as-Cash financing can be a good option for your customers if they understand the terms and conditions in the agreement. If they follow all the terms, this option offers a nice deal to your customers. They can take advantage of no interest rates and sometimes no payments until a specified date.
However, the terms and conditions in these agreements can be confusing or misleading to the customer, which can create long-term consequences. If your customer doesn’t pay off the account by the required date, the lender can charge interest on the full purchase amount for the entire time period. When the interest is charged, it’s usually much higher than that of a standard loan or credit card (often between 20%-26%).
Although this may not have immediate consequences to the contractor, it can lead to a negative brand reputation if it upsets enough customers. If a customer has to pay large fees without understanding that would be the case, they will blame the contractor, not the lender. Ultimately, this will result in a loss of business for the contractors.
PROS AND CONS OF STANDARD INSTALLMENT LOANS
Standard installment loans are straightforward and easy for the customer to understand. They are simply monthly payments calculated from various interest rates, depending on the customers credit score. The customer understands and agrees to the monthly payment amount and interest rate, with no future surprises.
The transparency and simplicity of these loans create a positive buying experience for your customers in need of home improvement financing. This results in good reviews of your business, increased referrals, strong relationships and increased revenue. Standard installment loans are a much better long-term strategy for your business than many promotional alternatives.
However, this option may not be as appealing to customers with bad credit, since it will result in higher interest rates.
WHY CONTRACTORS CHOOSE US
We work with experienced home improvement contractors (in business more than two years with at least $1 million in annual revenue) who are dedicated to their customers. There are a lot of lenders out there, but our contractors like the level of customer service they receive from Medallion Bank. Instead of navigating a frustrating computer-automated answering system, you can instantly talk to a real representative when you call in.
We also help our contractors increase sales and close more deals, including:
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No contractor fees or costs for prime credit
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Competitive interest rates on loan amounts up to $65,000
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Low, affordable monthly payments to increase job sizes
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Customer friendly terms with no prepayment penalties
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Mobile app, online or call-in applications
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Friendly customer service available when you need it
You can control your profitability with a flexible process, and you never have to hand off your customer to a third party. Sign up as a new contractor to offer your customers home improvement financing and take your business to the next level.
