0 % Interest Free Loan
Low Payment With Extended Terms
Fixed Or Variable Rate
Secured Vs. Unsecured
The Choice Will Be Different For Every Individual
Whats good for one person will not be for the next. That is why there are so many options available when you are looking to get some financing for that new roof. We mentioned just a few up above, but the list goes on and on. Financial products have become increasingly complex in modern times, so much so that you need a degree just to understand how some of them work. To simplify the entire process, decide first on what your goals are.
Payment Driven Vs. Overall Cost
There are generally two types of customers looking for financing, those that are more concerned with the monthly payment and those with the overall cost. Some homeowners that are more then capable of paying cash for the new roof elect instead to financing simply because there are able to make a better return investing then they are getting charged in interest. Or they may decide the money will be better spent on an immediate vacation for the family. Whatever the reasons may be, this type of buyer is interested in the financial aspect of it more then anything else, and if the numbers make sense to them they are all in. The other type of customer just wants to be able to afford that monthly note. Often times, they are in immediate need of getting their roof replaced and just want to find someone to help them out. This is not to say there is anything wrong with this type of behavior, it is just recommended that everyone performs the same amount of due diligence before signing any paperwork.
Simple Interest Vs. Compound Interest
You want a simple interest loan, hands down. With this type of financing you are able to pay it off early with no prepayment penalty the majority of the time. Also, ever extra cent that you pay towards the loan beyond the minimum monthly payment will go directly towards the principal balance and not the interest. Therefore, what we recommend that you do is take out an extended loan with a low payment and then whenever it is comfortable just pay a little bit extra into it. This way you can enjoy the comfort of a low payment but are allowed the flexibility to shorten those loan terms at any time that you would like. With a compound interest loan, you are responsible for the entire amount of interest due of the life of the terms regardless.
Revolving Credit, A Lot Like A Credit Card
This type of roof financing is easy to apply and qualify for. The premise is just like a credit card in that you are given a total limit and then can make minimum payments every month. The problem is that these minimum payments truly are just that, and the balance can therefor drag on indefinitely if you are not careful. That, and many people are more prone to overspend when they are given a high credit limit. That roofing job just turned into a new roof with gutters, insulation, and windows as well. Just like everything else, use caution when utilizing this payment option.
Is 0% Really Free?
Of course it isnt, these finance companies need to make their money somehow or another. Therefore, they charge the fee to the dealer, or in this instance the roof. What does this mean for the customer? That they are more then likely able to get a better deal if they were to pay by cash. However, as outlined in the previous examples, for some people it makes more financial sense to take this option. Trust me, everyone is entice when they hear about the 0% option. If it is something that you are truly interested in, just make sure that it is going to benefit you long term. Typically, the terms are also much shorter and therefore your payment is going to be a lot higher.
Please Don’t Take My House!
It is not comfortable to talk about, but none the less it is the truth. Many of these “hard money” lenders end up trying to find a way to make the customer default so that they can acquire the property. This is the difference between a secured and unsecured loan. With a secured loan, you are using something as collateral, such as your house. An unsecured loan, you are just signing your name and the institution is making a decision based off of your credit score alone. In some situations, a secured loan is the only way that customers can obtain financing. But, in our humble opinion, if at all possible go for the unsecured option. Yes, the rates are typically higher with an unsecured loan. However, you are never going to have to worry about somebody trying to take your house from you.