Most people do not plan for their heating & cooling system to breakdown, and even if they do, there is rarely a good time to spend $4,000-$6,000 at the drop of a hat. We know and understand this. This is why we offer consumer financing for our new heating & cooling systems.
We have many programs to suit most potential buyers with all sorts of credit scores.
The purpose of this article today is to discuss regular financing options vs. refinancing your home to pay for home repairs or any other of life’s unplanned events.
Some homeowners believe that contractors are trying to rip them off. Most loan companies offer a standard unsecured loan or revolving credit card at a fixed interest rate of 8-10% for 60 months or less. We recommend that you only use the loan or credit card for the purchase it was intended, make timely payments, and pay towards the principle when possible to maximize your savings.
The idea that a contractor is trying to rip off a consumer with a loan is the farthest thing from the truth. Contractors offer financing to help the customer in a difficult time, not to take advantage of them.
Let’s look at this example: John Doe needs a heating & cooling system to keep his family comfortable. He did not plan for this. A loan based off of a 3% interest rate is rather appealing to John, and he decides to refinance his home and add in the cost of the new heating & cooling system. The new heating & cooling system for John’s home costs him $6,000.00. John Doe’s bank loves him for this. Not only is he doing more business with them but he is essentially putting his home up for collateral against anything he may purchase for his home with his refinancing money.
To make this calculation easy to understand we will not count the balance of the mortgage on his home in our calculation.
See the calculation below for the math behind this loan:
$6,000.00 financed in his home mortgage over 20 years at a 3% interest rate.
Over the life of the loan he will pay $1,986.21in interest. This DOES NOT account for inflation. If we account for inflation at an average of 2% over 20 years the real cost of the interest in this loan looks more like $2,951.40.
On the other hand lets examine a $6,000.00 loan over 5 years at 8% interest.
The consumer would pay $1,299.50 in interest. This DOES NOT account for inflation. If we account for inflation at an average of 2% over 5 years the real cost of the interest in this loan would be about $1,434.75.
So for the same amount of money the loan that has an interest rate of more than double, is actually cheaper by about $1,516.65.
(2,951.40(refinance home) - 1,434.75(8% interest 5yr) = $1,516.65 in savings.)
We would like to remind everyone no matter what type of loan you get whether it be a fixed payment loan or a revolving credit program, it is important to pay your payments on time, make extra payments when you can towards the principle & not add anymore debt onto that credit card or loan.
We are here to help for all of your heating & cooling needs including repair, installation and maintenance, from Pikeville in Eastern Kentucky to Lexington in Central Kentucky and everywhere in between.
For more information on refinancing your home, please click the box below and check out Dave Ramsey's website. It has some helpful information.
Disclaimer: These calculations are based off of timely payments without late fees, penalties, or any other variables that may occur. This calculation is only meant for an example. Every consumer’s credit situation is unique and this article does not apply to anyone on an individual basis. We recommend you consult with your own accountant if you wish to perform any personal calculations.