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10 questions to ask a contractor about financing
Short answer: Before you sign, ask for the APR after any promo period, whether a 0% offer is true 0% or deferred interest, who the lender is, whether the credit check is soft or hard, and what fees apply. Then compare it with personal loan offers you can check without affecting your credit.
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- What is the APR after any promotional period?
The promo rate can end. The standard APR decides your real cost.
- Is the promo a true 0% APR or deferred interest?
Deferred interest can add back all the interest if you miss the payoff date.
- Who is the lender?
You're borrowing from the lender, not the contractor. Look it up before you apply.
- Is the credit check soft or hard?
A hard inquiry can lower your score slightly. Pre-qualifying elsewhere uses a soft pull.
- Are there origination, application or late fees?
Fees add to your total cost and may reduce the money available.
- Is the price different if I pay cash or bring my own loan?
Some contractors build financing costs into the price.
- When is the contractor paid, and in what stages?
Paying everything upfront leaves you less leverage if the job goes wrong.
- What happens if the work isn't finished or I dispute it?
You may still owe the lender. Ask how disputes are handled.
- Is there a prepayment penalty?
You should be able to pay early without a fee.
- Can I see the full loan agreement before I sign?
Read the APR, term, total of payments and fees in writing.
Checking your rate uses a soft credit pull. Accepting an offer and finishing a lender's application may lead to a hard inquiry.
Contractor financing questions
Should I always compare contractor financing with a personal loan?
Yes. Comparing takes minutes with a soft pull and shows whether the contractor's offer is a good deal.
Is it rude to ask a contractor about their financing terms?
No. Contractors expect questions about price and payment. Clear answers are a good sign.
What if the contractor won't say who the lender is?
Treat that as a warning sign and don't sign until you know who you're borrowing from.