If the homeowner waits too long then very terrible things can befall him. If he waits for that first bill or just starts making the payments each month he has really done it. If the homeowner does that, then the interest on the loan is re-calculated from way back when everybody signed the contract. At the 15% signature loan interest rate the interest can be substantial. If the average “home improvement” is $10,000 then the homeowner is facing $750 in hidden costs he never knew were there.
Finance companies can be good news, in a way.
The good news is that the finance company will not release a dime to the home improvement company until the homeowner accepts the work in its entirety. So not signing that final acceptance form is a very, very big hammer. Going through an outside finance company (even with no “interest free” plans) usually costs the contractor about 2%.
Let’s look at what that finance company is really doing. The finance company is only going to release funds to the contractor after you have said the job was done to your satisfaction.
If it takes three or four months to get it all done (whatever the contractor says, it will usually be that long) then the contractor gets nothing for a long time. So the finance company is nailing the contractor to a post and the contractor has to accept 2% less than the face value of the contract. You on the other hand are in a usurious pickle.
You may well pay interest on that loan from the day you signed, not from the day the contractor got paid. Thus you will pay interest on a loan, where there was no loan. You can easily wind up paying interest on money you never had and the contractor never had.
To start the job the company’s manufacturing representative will still arrive — if possible — just hours after the salesman has put the signed contract in his boss’s in-basket at the distant office. This is called “Spiking. Under federal law, a homeowner has three days to change their mind about a home improvement sale. But if the project has “started work” then the homeowner is out of luck — he’s committed.
The company representative will thus make great effort to get to the homeowner’s door as fast as possible (the next day works) and take “measurements.” “Measurements” are considered “start of work” and the homeowner is now on the hook. Real construction might not occur for weeks or even months, but the homeowner is on the hook. He will pay …
In some cases the “start of work” can really occur just hours after the sale. It is possible for
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