Revolving credit accounts work like store credit cards but without the plastic. They’re a good way to generate repeat business because you’re the store: Customers can only use these accounts with one of the finance company’s authorized contractors.
Revolving accounts are used to finance everything from $200 handyman jobs to $30,000 bath remodels. They may be secured or unsecured depending on the lender, but once the customer has set up an account, they can use it again and again.
Rates vary from prime +3.99 points to prime +14.99 points, depending on the customer’s credit score. The contractor usually doesn’t get paid until the work is done, so this type of credit is best for smaller jobs that are done quickly, such as replacement windows or siding.
Some lenders have payment schedules where, like with a credit card, the payments decrease with the balance. The downside is that if homeowners make only the minimum payments, they pay more interest over the life of the loan. Other lenders set the payment at the time of the draw and keep it there until the customer borrows more money.
Unsecured installment loans are most appropriate for jobs priced in the high teens to the low $20,000s, although amounts can range from $5,000 to $50,000 for customers with great credit. Interest rates are lower than for revolving accounts, and terms can be as long as 240 months.
The closest analogy is a car loan, where payments stay the same throughout the life of the loan. Say you have a $10,000 window job with monthly payments of $200. If you pay it down to $6,000, you will still be paying $200 per month.