A lot of companies today utilize in-house financing options. What exactly is in-house financing? This is a program wherein the seller can also extend financing help to their clients. This can be a good way for companies to not rely on financing institutions. That means customers can immediately complete the transaction without any trouble. This gives the business more sales, and a faster way for customers to get what they really want.
These are present in different industries. For instance, car dealerships also have in-house financing programs. This means that those interested to purchase their cars can go directly to them. Should you go for in-house financing or should you stick with the regular bank financing option? Here are some things that you want to consider.
In-house financing option doesn’t require too many paper works. It simply needs you to come up with a down payment and you are good to go. Because it is easier to get approved when you stick to in-house financing option, it is often times said as the best option.
On the other hand, banks will most likely give you a ton of requirements that you have to meet. You will need to show you income tax return, plus proof of your employment. Also, it is a must that you have sufficient amount of money in your bank. All of this will undergo investigation. And of course, there is always a chance that you will get denied if you go for banks.
The good thing about bank loans is that they most likely provide lower interest rate. Though the interest rate will also fluctuate especially if you are buying real estate, you will still pay less when you opt to stick to bank financing. There are also banks that can provide a fixed interest rate for you for the next 5 years.
For the in-house financing option, you will have to pay more. Could you imagine an interest rate of 14% to 18%? However, these rates are fixed and are not based on the volatility of the economy. Which one should you choose? You want to make sure that you also look into the average inflation rate. Is the average inflation rate just within 7% to 8%? If so, you are still not getting a good deal from in-house financing.
A lot of banks allow you to pay your loan for 20 years especially if it is real estate. On the other hand, things are a bit different when it comes to in-house loans. You will have to pay for the loan in a short period of time. That means you may have to cover for the entire loan in five years. Now, always crunch the numbers before you act since this can be detrimental to your finances.
A lot of people today are looking to get a house or a car via in-house financing program. Though it is always a fall back option, you need to consider the pros and cons of this financing method. There are instances when it is better to stick with banks.