Prime and Second Look Financing are two types of lending options you can offer consumers based on where their credit scores fall.
Here we’ll cover the main differences between the two options, so you understand which type of financing option is best for each customer.
Let’s start with Prime
Generally, a prime loan is reserved for customers who pose the least risk of defaulting on their loan. This low risk assessment is determined by lending entities through the customer’s credit score. To qualify for a prime loan, a customer must have a good to excellent credit score of 680 or higher.
The prime rate, which is the interest rate commercial banks charge customers with higher credit scores, is also the lowest interest rate a customer can be charged for taking out a loan.
In general, interest rates serve as compensation for the risk taken on by the lender (such as a bank or other lending entity) and to provide a way to cover costs associated with lending.
For prime lenders, a high credit score determines a customer’s trustworthiness. So, only those customers with high scores will be given a Prime loan.
Now let’s dig into Second Look
Second Look is a financing option offered to consumers who are just below the threshold served by prime finance providers (FICO score between 550-669).
The near-prime market is large. According to the latest report by the Fair Isaac Corporation published in The Ascent, 43% of U.S. consumers have a credit score of 699 or lower.
What this percentage means is that nearly half of U.S. consumers will not qualify for a prime loan.
Yet, these customers will still look to you to provide them with a reasonable financing option for an expensive HVAC job they either cannot or may not want to pay for upfront.
Credit for Comfort’s lending partner Fortiva, our Second Look option, is one way to give your customers the peace of mind that you’ve got them covered, by offering them a great financing alternative to a prime loan.
Rather than looking solely at customers’ credit scores to determine loan approval, Fortiva’s algorithm takes into account other factors, including your customer’s banking information and history of various payment records, to make its approval decision.
And with approvals down to a 550 FICO, your customers have a much greater chance of getting a yes, helping you close on more sales.
The ability to offer Prime and Second Look lending options
At Credit for Comfort, we understand that in order to maximize the benefits of offering lending for every HVAC job, you need the ability to help all your customers, including those who qualify for Prime loans and those who do not.
That’s why we offer you the possibility to provide your customers lending options from both our Prime lender, GreenSky, and from our Second Look option, Fortiva.
With both of these lending partners, you have the flexibility to choose from a variety of rate plans to offer your customers that will work best with your business.
The application process is simple, and you’ll receive clear guidance along the way from our Customer Success Team. You can apply for our Prime or Second Look option only, or you can apply for both.
And if you provide both Prime and Second Look, our waterfall feature makes it easier than ever for your customers to apply for both types of loans in minutes.
The process is fast and easy.
Your customers can always start their application with GreenSky, and if they’re not approved for a prime loan, they have the option to immediately apply for a Second Look alternative through Fortiva.
In this first application process, GreenSky will do a full check on your customers’ credit score known as a hard pull.
Though generally one hard pull inquiry will not have a significant impact on your customers’ credit score, multiple hard pulls, particularly in a short time span, could lower their credit score.
The beauty of our waterfall feature is that it protects your customers from this risk.
After applying for Greensky, Second Look will only require a soft credit pull. Since this type of credit pull won’t be connected to a specific application for new credit, it will not impact your customers’ credit score in any way.
To read more about how multiple credit inquiries can affect your customer’s credit score, read this post.
So, are you ready to offer financing?