Consumer Finance

B T South and the equipment manufacturers want to make financing as attractive as possible to help facilitate your purchase of our equipment. The longer the finance term and the lower the interest rate, the more it costs and thus customer discount prices for paying in full are often deeper than the discounts offered with financing.

When you apply for a revolving credit line, it will typically show the default interest rate on the application which will be very high, perhaps 27.99% or higher. While the default rate is scary high, realize that mower manufacturers can buy that rate down for the purchase of their products. Very often the manufacturer is buying the rate down to 0.00% for the purchase of a particular item. When you apply for the card, you are not authorizing a purchase, so the balance is $0.00 and 27.99% of $0.00 is $0.00. When it comes time to purchase a mower on the card, that's when you need to read carefully to confirm that the rate is agreeable.

In our experience finance companies look most closely at two things:

• Credit Score

• Stated Income

Pay close attention to what is allowed to be counted in your stated income. Applicants often assume it is just their own income that they can prove with a W2 or a paystub. But most of the banks we work with allow household income and don't ask for verification of income except when borrowing over $50,000. Even though you are applying alone, not jointly, this would allow you to state the combined income of all persons in the household that help pay the bills. Also allowing you to put down side hustle undocumented income from sources outside your main job.

MYFICO.COM explains finance shopping here:

Research has indicated that FICO Scores are more predictive when they treat loans that commonly involve rate-shopping, such as mortgage, auto and student loans, in a different way. For these types of loans, FICO Scores ignore inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won't affect your scores while you're rate shopping. In addition, FICO Scores look on your credit report for rate-shopping inquiries older than 30 days. If your FICO Scores find some, your scores will consider inquiries that fall in a typical shopping period as just one inquiry. For FICO Scores calculated from older versions of the scoring formula, this shopping period is any 14-day span. For FICO Scores calculated from the newest versions of the scoring formula, this shopping period is any 45-day span. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO Scores.

Source:
https://www.myfico.com/credit-education/faq/credit/how-do-inquiries-impact-credit-scores

Revolving credit and installment credit are two types of credit that work differently. Revolving credit allows borrowers to spend borrowed money up to a predetermined credit limit, repay it, and spend it again. With installment credit, the borrower borrows a lump sum of money that they must repay, in installments, by a specified date.

Both revolving and installment credit come in secured and unsecured forms, but it is typical for revolving credit to be unsecured and for installment credit to be secured. In our case the equipment being purchased is typically the collateral securing an installment loan.

Installment Credit:
• You will need to reapply for credit each time you make a new purchase.
• The equipment being purchased is typically encumbered as collateral, meaning you can't sell it or trade it until the loan is paid in full.
• Installment debt usually ends up being viewed more favorably than revolving debt by FICO credit scoring models. For a landscape professional who makes repeated large purchases on credit, doing so with revolving debt can sometimes raise the buyers credit utilization to a point that it has a negative impact on credit scores. For this reason, larger outfits doing routine equipment purchases typically use installment credit.

Revolving Credit:
• Make repeated purchases against a credit line without re-running credit each time.
• The equipment being purchased is typically not encumbered as collateral.
• Special subsidized finance rates (0% for xx months) are only applicable for specific promotional purchases made using the card. Other "standard rate" purchases would be at a much higher typical credit card interest rate.
• Don't be alarmed if you see an unacceptably high interest rate stated during application for a revolving credit line.
• Do be alarmed if you see an unacceptably high interest rate stated in the equipment purchase contract. If no rate is stated at all in the purchase contract, then that would mean it is the default rate for the card which will be high.

Revolving credit can be a positive or a negative to your credit score. In general, it is recommended to keep revolving credit utilization below 30%. Example: If all your revolving credit lines (credit card limits) combined total $20,000, then a good target is to keep your combined outstanding balances for those accounts below $6,000. This is why it is generally not recommended to close a credit card, because that would reduce your available credit which would make the debt you do have a larger percentage of your available credit.

It goes without saying that stores are going to try to make their offering look as attractive as possible. We did a comparison of what was being offered buying the same mower on a big box store card compared to our offer being subsidized by the manufacturer. What appeared, at first glance, to be a better deal at the big box store was not even close.... LINK to comparison