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How Unsecured Home Improvement Loans Work

Posted June 16, 2020 by EnerBank USA


As a contractor, it’s in your best interest to make it as easy as possible for your customers to get the home improvements of their dreams. Not everyone has tons of cash sitting around to pay for their home improvement projects upfront — in fact, the majority of Americans need to take out a loan to pay for renovations.

The most successful contractors help customers work through payment decisions by offering their own choice of payment options. And though there are many options for dealers when it comes to home improvement payment options, you can’t beat the stability and trust you can find when working with an FDIC-insured bank that has experience weathering tough economic conditions.

What are Unsecured Home Improvement Payment Options?

Unsecured home improvement payment options are a type of personal loan that homeowners can take out that require no 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. And customers with a wide range of credit scores can often be approved for these types of loans. For example, four out of five applicants at EnerBank are approved for a loan. This makes it a great option for those customers who want to get started on their home improvement project right away.

How Does It Work?

To begin offering a choice of payment options to your customers, you’ll need to apply to become an EnerBank contractor or join an existing loan program with the bank. We’ll provide you a brief orientation and all the tools you need for success. You’ll start by making sure you advertise payment options in your marketing materials, and offering a choice of payment options to 100% of your customers.

Homeowners can qualify for an unsecured home improvement loan by filling out a quick and easy paperless application. As the contractor, you get to choose the specific loan products that you’ll 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.

Once your customer is approved for the loan, you can get started on the home improvement project, and the bank pays you directly via ACH, so you don’t have to worry about collecting payments from the homeowner.

There are several types of home improvement payment options, including same-as-cash, reduced interest loans, and even zero interest loans. There are also some combination loans that are custom-designed for solar projects. Homeowners can borrow enough to cover a simple HVAC replacement, or fund a larger remodeling project.

Benefits of Unsecured Home Improvement Loans for Contractors

There are many reasons to offer unsecured home improvement payment options to your customers. 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 for contractors of offering these type of loans:

1. Quicker Turnaround Times

Have you ever had a project get delayed 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, which will help you manage your cash flow and your work schedule better. You’ll also have happier customers, which will help your business grow.

2. 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. Homeowners who are approved for contractor-offered payment options are much more likely to complete the job with you. You also won’t feel the need to try to “save a sale” by cutting into your margins, because payment options, when offered correctly, eliminate cost objections.

3. Increase Your Leads & Boost Your Close Rate

You can see a 50% 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 — because many customers haven’t yet decided 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 see a multiplied effect on your business!

4. 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 project to get the results they truly wanted. 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. Ready to learn more? Fill out the form on this page and a member of our team will reach out to help you get started!

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