Source: REPLACEMENT CONTRACTOR Magazine
Publication date: July 1, 2006
By Mary Beth Temple
The advertisement promises that you can “Buy now and make no payments until 2007!” Savvy customers flock to these programs, often called same-as-cash financing, as they look to maximize their financial resources. “The old paradigm in financing home improvements was low monthly payments and low interest,” says John Harris, senior vice president of EnerBank USA, a specialist in same-as-cash financing for the home improvement industry. “The new paradigm is same-as-cash for 90 days or six months.”
How It WorksSame-as-cash financing allows the homeowner to apply for a bank loan for the full amount of the purchase, defer payments for the term of the loan (generally 90 days, six months, or 12 months), and pay no interest on the loan provided the entire principal is paid back within the approved loan time frame.
After the loan is approved, the homeowner receives a two-party check made out to both the homeowner and the contractor. The homeowner endorses the check when the job is finished, and the clock starts ticking on repayment when the check clears the bank. Banks don't provide this service for free, of course. The contractor pays a percentage of the loan amount in fees, which vary according to the term length of the loan.
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