In-house financing is a way for customers to get a loan without
having to rely on the financial industry outside of a company's
reach. In other words, in house financing is a kind of seller
financing that eliminates the need or reliance of a company on
the financial sector to provide a customer's funds. The seller
becomes the financier.
One common user of in-house financing is the automobile
sales industry, but it's certainly not limited to that particular
sector. Any industry that relies heavily on a buyer taking out
a loan, from car
sales, home sales, furniture
work and motorcycles
etc. can often benefit from providing in-house financing to customers,
thereby allowing them to take on more customers and ultimately,
approving more customers for loan approval, even those with bad
Essentially, with in-house financing, a company fronts you money
as credit. Sometimes, just having a job is enough to qualify for
in-house financing, with gives the company proof that you have
an ability to pay back a loan. Some companies that offer in-house
financing will finance you if you can make a down payment.
There are some advantages associated with in-house financing.
Often, you can get financing at lower costs since there aren't
any middlemen (financial institutions and other lenders that add
on their own financing fees on all transactions). Since the seller
of the goods is making money off of the sale, financing is oftentimes
on easier terms and conditions. As well, getting approved for
in-house financing is often a faster procedure, since customers
don't need to approach different lenders and compare them. There's
usually less documentation that needs to be filled out in order
to get approved.
In-house financing is particularly useful for those that have
bad credit, who might otherwise be turned down from getting loans
or only get loans approved at high interest rates from most other
banks or financial institutions and lenders. Some companies offering
in-house financing don't even run credit reports.
As mentioned, in-house financing is very common in the automobile
sales industry, but also across several other industries. Some
common reasons why a company will offer in-house financing are
costs and control. Costs become fixed after an initial investment
in in-house financing-based hardware and software is made. The
more loans that are made, the less expensive the servicing costs
per loan are. And the more loans made, the better a company can
market itself and its comprehensive loan portfolio. And control
comes into play, since an in-house computer system allows a company
complete freedom and independence to offer loans on their terms.
If you happen to have particularly damaged credit and don't want
your credit run too many times needlessly, you may want to take
advantage of companies that offer in-house financing. Loans are
generally faster and easier to get approved for, and there's less
typically less documentation required compared to getting loans
through other financial institutions and money lenders. And it's
a win-win for the company offering in-house financing, who can
gain more control over costs and loan terms by offering financing
in-house rather than relying on financial middlemen.