As a contractor, you might assume that most financing companies treat your clients equally, or provide the same service. In reality, there are dramatic differences between financing companies. A good financing company can ensure your customers have a great funding experience and can ensure them taking out a low-cost loan, while a bad financing company can lock-up your customers for a 10-year, high-interest loan. In this article, we are going to find out the difference.
Calculate The Interest Costs
At Ccino, for every homeowner that pre-qualifies through our platform, we show them exactly how much this loan will cost them in the life-time of the loan. Most other financing companies, don't, and here's why:
Let's assume your customers take a 9.99% APR loan of $10,00 through Ccino for a 2-year term. After 2 years, your clients will pay 1,064 in total interest costs.
Most traditional lenders claim that they offer similar APRs, what they don't tell your clients, is how much they will pay and how long the terms will be. Their terms are usually about 10 years and for the same 9.99% APR of $10,000 loan, your clients will pay $5,792 in total interest costs - almost 60% of the total loan value!
As a contractor, working with financing companies that charge high interest and longer terms is bad for your reputation - as customers who got charged high interest will refer their friends to your competitors and not your business. It's important to ask the interest as well as the costs to clients.
0% APR Could Be Tricky
There are many financing solutions that claim they charge your customers 0% APRs, and in exchange, your business pays the company a certain percent rate.
However, if you read through the 369 complaints of Greensky LLC, a company that advertises themselves as the "0% APR lender", you can see the "0% APR" really meant free interests for a few months, then paying interests for the remaining months of the loan - and the rate is averaged to be 27.3% APR, leaving many borrowers financially ruined and many lost their homes.
At Ccino, we celebrate friendly competition from other companies, but the one thing that we cannot tolerate and will not be silent about, is how these traditional financing companies treat their homeowners and preying on homeowners' weaknesses in financial literacy to impose unfair terms on their loans. That is something Ccino will never do.
When someone approaches your business for a 0% APR loans, ask them how long the terms of the 0% loans will be, what are the costs to you, and how much will the interest costs be.
Pre-Payment Penalties Make A Difference
Many lenders do impose pre-payment penalties, which means if your customers want to pay off the loan early, they have to pay a penalty fee which can be a fixed percent of the entire loan amount.
This makes a big difference in customer experience for you as a contractor, because when you can present financing solutions that puts the control in the homeowner, so that they can pay off the loan whenever they want to.
Evaluate Customer Care
What kind of care does your customer receive before, during, and after their funding experience? Traditional lenders have a reputation of sending homeowners back and forth on the phone lines and corporate inefficiencies when it comes to homeowner disputes. For newer companies, the experience is often smoother as these companies compete with traditional lenders mostly for the services they provide.
At Ccino, our customer success representatives typically answers homeowner phone calls within 5 rings and we call back homeowners on average 6 minutes. We will work with homeowners to explore multiple options, not just personal loans but also home-improvement credit cards and HELOCs. Our reps always be with homeowners and guide them through the process, regardless of the outcome.
When selecting a financing company, do some research on how the companies support borrowers requests. Because when your clients have issues that you cannot answer, they would need to find the financing company for help, and finding the right company gives your business a better reputation.