As a retailer or service provider, one of your top priorities is eliminating friction from your customers’ purchasing experiences. Additionally, you want to empower customers to buy more from your business.
For years, many service providers have accomplished this by offering customer financing via credit cards. Your business may have even employed this tactic to increase average purchase value and boost sales revenue.
Customer financing through credit cards certainly has its advantages. However, there is a better option: point-of-sale loans through LendingUSA.
In recent years, point-of-sale loans have emerged as an effective means of incentivizing consumers to purchase more goods or services. Join us as we explore why consumer loans through LendingUSA appeal more to customers and benefit your business.
What’s a Point-of-Sale Loan?
At first glance, point-of-sale loans function very similarly to credit cards. In both instances, your customers can typically apply for the financial product at the point of purchase. They complete a short application and receive a prompt pre-approval. If approved, they can complete their purchase.
That is where the similarities end. Loan-based point-of-sale financing is quite different from private label and point-of-sale credit cards. For starters, a loan like one obtained through LendingUSA allows customers to borrow precisely enough to fund a specific purchase as long as they stay within borrowing limits.
Additionally, customers do not have an open line of credit. Once the purchase has been funded, they can repay the loan at a fixed monthly rate. This consistency provides your customers with much-needed financial stability.
From your perspective, these loans through LendingUSA can be an asset to your business. This financial product reduces friction during purchasing and incentivizes customers to make larger purchases.
You can also access your funds quickly when you partner with a reputable POS financing platform like LendingUSA. This ensures that your business enjoys a strong, stable cash flow.
Why Loan Financing Appeals to Your Customers
Before you start offering loan financing, it is essential to familiarize yourself with the product and understand why these loans appeal to customers. Generally speaking, loans through LendingUSA are an excellent option for your business and your customers.
Customers Can Borrow What They Need
As you are probably well aware, credit card providers typically have a tier-based credit limit system. Because of this, customers typically have to apply for a higher credit limit than the cost of the items they want to purchase.
For instance, some credit card partners set limit thresholds in $1,000 increments. If one of your customers wants to obtain a credit card to fund a $4,100 purchase, then in this scenario, they would need to apply for a $5,000, or often even higher, credit limit.
While this example oversimplifies the borrowing process, it highlights a fundamental difference between credit cards and point-of-sale loans. Excess credit might appeal to some consumers. However, those on a tighter budget might be discouraged from applying for credit card financing because they may fear overspending.
Loans through LendingUSA eliminate these concerns by allowing customers to borrow precisely what they need to purchase your goods or services. Customers who are working toward financial goals but also want or need to make a purchase now can do both by guarding against overspending.
Loans Make Budgeting Easier
When it comes to budgeting, loans offer several advantages over credit cards. For one thing, loans provide a fixed repayment schedule with a set amount due each month. This predictability allows borrowers to plan their budgets more effectively since they know exactly how much they need to allocate toward loan payments each month. In contrast, credit cards come with variable minimum payments; the temptation to make only the minimum payment can lead to long-term debt and interest accumulation.
Additionally, personal loans often have lower interest rates compared to credit cards, resulting in potential cost savings over time . By opting for a loan, individuals can establish a clear repayment plan and better manage their finances, ensuring a more disciplined approach to budgeting.
Credit Card Usage May Be Declining
While experts disagree on whether credit card usage is trending up or down, several statistics point to the latter. Important to retailers is the drop in private label credit card holding and usage. The number of Americans who hold private label credit cards is down from 52% in 2005 to 36% in 2020, according to the Bureau of Financial Protection’s 2021 Consumer Credit Card Market Report.
These statistics explain why some consumers maybe finding loans more palatable than credit cards when financing purchases. If consumers are not using their private label cards, are they really interested in obtaining another? The answer is probably not.
Loans through LendingUSA offer most of the advantages of private label credit cards but with few of the drawbacks. If you are looking for a way to boost your sales and encourage your customers to buy more, our loans might be a great solution.
Loans Have Fixed Monthly Payments
Credit cards are notorious for their fluctuating monthly payments. Generally, minimum payments decrease as consumers pay down their balances. However, those payments can quickly shoot back up to or above the original threshold when consumers make additional purchases.
Since loans through LendingUSA’s are not open lines of credit, the monthly payment is fixed. As a result, a consumer can efficiently work the cost of repaying the loan into their monthly budget when applying for financing. This attribute of our loans puts many customers at ease because they know exactly what they are expected to pay each month.
Customers Might Be Able to Obtain 0% Interest
Some credit card issuers may offer 0% interest promotions, however it may be difficult for most consumers to access this perk.
By contrast, most of the point-of-sale loans through LendingUSA have a promotion included whereby the consumer pays no interest if the loan is repaid during the promotional period. In addition to offering this promotion, all loans through LendingUSA do not include prepayment penalties.
This can be a huge selling point when advertising the option of financing through LendingUSA to your customers.
Loans Have Fixed Rates
Even if your customers don’t take advantage of the no interest promotion, they will enjoy a fixed interest percentage rate on their point-of-sale loans through LendingUSA. These rates may also be lower than those available via credit card-based financing. What better way to encourage your customers to make a purchase than to provide them with a frictionless financing option that is also affordable?
Are you interested in learning more about LendingUSA’s point-of-sale customer financing loans? Do you want to partner with a reputable company with a streamlined point-of-sale financing program? And are you ready to grow your business by financing important moments in the lives of your customers?
If so, schedule a demo of LendingUSA’s dynamic lending platform today and let us modernize the way you provide customer financing.