Eventually, the job will be finished and the homeowner will make a final payment.
And while the maximum down payment … by law — on a job is usually 10% or $1,000 — whichever is less — you must understand that in most cases the paltry down payment has almost completely covered the company’s material’s cost. The rest of the money they get is gravy. For example, if the job is exterior siding then the average sales price might be $12,000. The customer has to make an initial deposit of 10% or $1,000 which ever is less so that’s $1,000. What does the siding actually cost on a $12,000 deal? It costs from $1,000 to $1,200.
If the homeowner didn’t have enough money to pay cash, then the deal was financed. Often, the process of getting the homeowner some financing — a phone call made to a finance company or a bank from right inside the home — is used as a psychological tool to help close the sale, hard.
If the product has been financed then the company will receive most of their money about 30 days after the product has been installed. So, yes, there is safety in financing the job — so long as such financing is not with the home improvement company itself.
There is a real potential for even more fraud when getting the job financed directly through the home improvement company itself. Yes, sometimes the “finance company” is secretly owned by the home improvement company. If this is the case then that fact is usually hidden. Worse, sometimes this fact is presented to the homeowner as being a benefit!
If it is the case then it is a calamity and the homeowner has lost all control over his home, and his money. He can lose his home if he does not pay, even if the job was done in a very shoddy way with poor materials.
Sometimes to sweeten the deal the company will offer “interest free loans” for three, six, or even twelve months. They may actually be free to the customer but the construction company is paying for it on the customer’s behalf. The finance company will charge the construction company two, three or even up to six percent of the face value of the contract for this “interest free loan.
If the homeowner pays off the loan before the first payment is actually due then most of these finance companies really have given the homeowner an interest free loan. What the finance company expects the homeowner to actually do is to miss this chance for something free.
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