American consumers are reeling from the effects of global economic uncertainty. And while nothing can guarantee financial stability, shoppers have various financing options that increase their purchasing power amid a fragile system.
This article from United Consumer Financial Services explores the most popular and effective financing solutions to fight economic uncertainty. We examine these solutions so you can make an informed decision regarding how to best bolster your financial strength in a season of economic ups and downs. Read on to get started.
Traditional Bank Loans
Traditional loans, including personal and business loans, are standard financing solutions. Bank loans typically have fixed terms and rates, which makes it easy for individuals to budget and plan to make payments.
However, traditional bank loans aren’t always accessible to people who need financing help. Banks are notoriously picky about who they’ll lend to and how much they’re willing to lend out. You’ll have difficulty securing your loan if there’s any sign of bad credit. Most banks won’t even consider providing a personal loan if you have no credit.
Applying for and gaining approval for bank loans is time-consuming and wrought with paperwork. After you’ve spent the time and energy providing your bank with the requested information, there’s no guarantee they will approve you. Your acquisition of a personal loan is up to your bank. And if they say no, where do you turn to get the financing you need?
Credit Cards
Credit cards are a form of financing that allows you to bring home your purchase and pay for it over time. A credit card gives you purchasing power if you’re planning an immediate purchase and don’t have the cash to pay upfront.
Unfortunately, credit cards pose financial risks. Hidden costs and high annual fees tack on unexpected and unplanned expenses, creating stress and causing economic harm to the cardholder. Add to this the research-based fact that credit card usage is directly linked with overspending. For example, if a diamond engagement ring is the desired purchase and a credit card is the payment option selected, missing just one payment means a late fee and compounded interest fee. That’s no way to start a marriage!
Additionally, credit card debt is easy to accrue and can feel impossible to overcome. According to a 2024 Bankrate survey, 35 percent of Americans carry credit card debt from month to month –– an increase of 6 percent from 2022.
What is meant to increase buying power and freedom for the consumer can decimate their financial stability.
Home Equity Loans
A home equity loan lets you convert a portion of your owned home value into cash. If you need capital, a home equity loan is a sure way to get it quickly. Like a mortgage, you pay one-time fees in the form of closing costs. Over time, you repay the total amount of the loan plus interest.
Home equity loans put cash in your hand during economic and financial uncertainty. However, this financing solution is only accessible to homeowners with good credit. And if you do choose to pursue a home equity loan, you must educate yourself about the risks:
- Your home is collateral – If you default on payments, you could lose your home.
- You pay closing costs – Closing costs are typically two to five percent of the total amount of the loan. Factor these fees into your planning so you’re not bombarded with surprise costs.
- You’ll have two mortgage payments – If your existing monthly budget is tight, a home equity loan is not a sustainable solution. Paying off your loan means you’ll be responsible for your primary mortgage and home equity loan payments.
Home equity loans are attractive financing solutions for individuals with financial stability. Unfortunately, home equity loans aren’t accessible to many looking for financing solutions. If you don’t own a home or have paid roughly 15 percent of your total mortgage, you don’t qualify.
NOTE: A HELOC, or Home Equity Line of Credit, is an open line of credit using a home’s equity. A consumer could apply for this loan in anticipation of needing funds and draw amounts as needed. Minimum payments each month are for the interest on the borrowed amount.
Consumer Financing
Consumer financing allows individuals to bring home their big-ticket purchases while paying for the item over time and in affordable, scheduled installments. Below we explore a few benefits of consumer financing and how it can strengthen consumer wallets and help businesses during economic uncertainty.
Increased Affordability
Consumer financing options can make purchases more affordable by breaking down total costs into smaller monthly payments. A financed payment plan can help individuals manage their cash flow and purchase their needed or desired item or service right away. Before, their purchase was out of reach.
Accessibility
With consumer financing solutions from United Consumer Financial Services, shoppers can apply and receive their approval notice for financing in just minutes. And because consumer financing is a potential option, it’s an accessible solution that empowers individuals to fight economic uncertainty.
Flexible Payment Options
Consumer financing programs offer repayment flexibility, allowing individuals to choose repayment terms that work for their budget. This can help reduce financial stress and increase the consumer’s control over their finances during economic uncertainty. For example, if a consumer must replace their HVAC system immediately, financing a $5,000 purchase with repayments for 48 months and an APR of 17.99%, would be $147 per month. The consumer gets a warm home, and the monthly payment can fit their budget.
Post-Purchase Payment
“Buy now pay later” services do not require in-full payment at the time of purchase, making it easier for individuals to bring home big-ticket items without saving up for them in advance. This can be especially helpful when consumers need more lump-sum cash.
Consumer financing provides a wide demographic of shoppers with the access and purchasing power they seek to secure purchases during financial and economic instability.
Withstand Uncertainty with Proven Financing Solutions
Consumers and businesses alike must face the uncertain nature of today’s economic climate. Companies and distributors are uniquely positioned to provide accessible, sustainable financing solutions to support buyers during economic uncertainty.
Your customers are the lifeblood of your business. Give them the financing resources they need to withstand the unknown. By partnering with UCFS, you can access nearly 50 years of consumer financing expertise. We provide real-life solutions for real people who need options. Reach out to our team to learn how UCFS delivers life-changing financing that helps your consumer obtain the product or service they need today.