How Unsecured Home Improvement Loans Work for Contractors
Posted October 11, 2022 by EnerBank USA
As a contractor, it’s important that you make it as easy as possible for your customers to get the home renovation project of their dreams. Of course, not everyone has tons of cash sitting around to pay for their home improvement projects upfront — so many homeowners choose to take out a loan to pay for renovations.
The most successful contractors help customers work through decisions related to their projects by offering their own choice of payment options. With all the home improvement financing options available to contractors, you’ll want one with long-term experience, and that is an FDIC-insured bank.
What are Unsecured Home Improvement Payment Options?
Unsecured home improvement payment options are a type of personal loan that doesn’t require collateral. Unlike secured loans, a homeowner can obtain an unsecured loan quickly and without having to risk their real property or add a lien on their home. Customers with a wide range of credit scores can receive approval for these types of loans. For example, four out of five applicants at Regions | EnerBank USA are approved for a loan. This makes it a great option for customers who want to start on their home improvement project right away.
How Does It Work?
Homeowners can qualify for an unsecured home improvement loan by filling out a quick and easy paperless application. There are a variety of loan products you can choose to offer (terms, rates) that fit best with your sales model and business goals. It’s recommended that you offer a same-as-cash loan and a low monthly payment option to every customer. Homeowners can borrow enough to cover a simple HVAC replacement or fund a larger remodeling project.
Once your customer is approved for the loan, you can start on the home improvement project. You will then receive funding directly from the bank via ACH. This means you don’t have to worry about collecting payments from the homeowner.
Benefits of Unsecured Home Improvement Loans for Contractors
There are many reasons to offer unsecured home improvement payment options, and the benefits don’t just stop at your customers. By having a variety of appealing loan options, you’ll be able to boost your close rate and grow your business. Here are just a few benefits contractors can enjoy when offering these types of loans:
Quicker Turnaround Times
Have you ever had a project stall because your customer is waiting for a loan? Since unsecured loans have quick turnaround times, you’ll be able to start home improvement projects much more quickly. This will help you better manage your cash flow and work schedule better. You’ll also have happier customers, which can help your business grow through referrals.
Reduce Cancellations & Eliminate Discounting
You can expect your cancellations to be reduced* when you offer a choice of payment options to 100% of your customers because it ties the project to you — a customer will be more likely to stay with you and not ask to delay the project to perform further research or seek additional bids. You also won’t feel the need to try to “save a sale” by cutting into your margins through discounts because payment options, when offered correctly, eliminate cost objections.
Increase Your Leads & Boost Your Close Rate
You can see an increase in leads* (plus a better conversion rate) when you advertise a choice of payment options in your marketing materials and on your website. This is because offering a choice of payment options widens your sales funnel and better qualifies your leads — since many customers don’t know how they’ll pay for their project when they start shopping.
When you offer options, you open up possibilities and create opportunities for closing deals that wouldn’t have otherwise existed.
Meanwhile, the research data* shows that offering a choice of payment options can nearly double your close rate. For example: assuming a 25% baseline, you can increase your close rate to 44% when offering a same-as-cash loan and a low monthly payment loan. When you combine increased leads with increased close rates, you on your business!
Grow Your Average Project Size
Finally, offering a choice of payment options actually results in bigger jobs. Homeowners who finance their project spend 43% more* on their home improvement. More than one-third of homeowners regret not spending more on their projects. A choice of payment options helps them get what they truly want, which means more business for you.
Offering Unsecured Home Improvement Payment Options for Your Customers
When it comes to payment options, your customers want a choice. Every customer has a different budget and financial situation. By providing a choice of payment options, you’ll draw in more customers, stand out from the competition, and close more deals. Now that you know how unsecured loans work for contractors, pass it on customers. Ready to learn more? Fill out the form on this page and a member of our team will reach out to help!
*According to the Brickyard Study, commissioned by EnerBank USA, 2018
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