Posted by MeridianLink | April 12, 2023

Local Banks’ Role in Point-of-Sale Home Improvement Financing

The following post is part of a series of blogs written by MeridianLink Partners who will be attending the MeridianLink LIVE! User Forum in May 2023. To learn more about the event, visit


How Local Financial Institutions Can Play a Big Role in Point-of-Sale Home Improvement Financing


Credit unions and community banks play a crucial role in providing affordable and accessible lending options to their communities. However, in a constantly evolving lending landscape, your institution must diversify its consumer loan strategy to remain competitive. One way to do this is by offering home improvement point-of-sale financing. 


Home improvement point-of-sale financing allows borrowers to secure financing for their home renovation projects at the time of purchase, rather than having to apply for a loan separately. This makes the financing process more streamlined and convenient for borrowers, increasing the likelihood that they will choose to finance their project with their credit union or community bank. 


Partnering with home improvement retailers is key for financial institutions that offer point-of-sale financing for improvements. By working with retailers, your institution can reach a wider audience of potential borrowers and establish itself as the go-to financing option for home improvements.  


Offering point-of-sale financing for home improvements can benefit credit unions and community banks in a few ways: 


  1. Increase your loan portfolio: By diversifying your loan offerings to include point-of-sale financing for home improvements, financial institutions can reach a new demographic of borrowers and expand their portfolio. This can be especially important for financial institutions that support Low-Income Designated areas and/or CDFI.  

  2. Expand your member or customer base: By partnering with home improvement retailers, credit unions and community banks can reach a wider audience of potential borrowers who may not have considered the institution as a lending option before. Once onboarded with the new loan, the financial institution can now establish long-term relationships with increased wallet share.  

  3. Build loyalty with existing members or customers: By providing a convenient and affordable financing option for home improvements, credit unions and community banks can demonstrate their commitment to helping members or customers achieve their financial goals. This can increase satisfaction and loyalty, leading to increased business and referrals. 

  4. Stay ahead of the competition: As more lenders enter the home improvement financing space, financial institutions must differentiate themselves to remain competitive. By offering a convenient, affordable, and seamless experience, financial institutions can stand out in a crowded market.  

  5. Mitigate risk: Home improvement projects can be risky for lenders, as borrowers may overestimate the value of their renovation or encounter unexpected expenses. By partnering with home improvement retailers and offering point-of-sale financing, financial institutions can reduce risk by ensuring that the loan is only used for the intended renovation and that the borrower has the means to repay the loan. In addition, it is recommended that the lender require a signed work completion prior to funding to avoid any messy disputes between the retailer and client. 


Implementing a point-of-sale financing strategy for home improvement requires credit unions and community banks to take several steps:


  1. Establish partnerships with home improvement retailers: This involves identifying potential partners, building relationships, negotiating the terms of the partnership, and onboarding the new retailer. It may also involve developing marketing materials and training staff to promote the financing option to customers. 

  2. Develop loan products that meet the needs of borrowers financing improvements: This may involve creating flexible loan terms, offering competitive interest rates, and streamlining application processes.  

  3. Ensure they have the technology and infrastructure in place to support point-of-sale financing:  This includes integrating your loan processing systems with the retailers’ point-of-sale systems and developing a robust underwriting process to assess borrower creditworthiness. 

  4. Promote your point-of-sale financing option to potential borrowers: This may involve developing marketing campaigns targeting homeowners, partnering with local home improvement shows and events, and training staff to promote the financing option to customers. 


To summarize, offering point-of-sale financing for home improvements is a smart strategy for credit unions and community banks to diversify their loan portfolios and stay competitive in a crowded market. This is increasingly important in a market with liquidity challenges where offering the right types of loans is critical. Not only can home improvement loans provide a stronger-than-average loan yield, but they are also a pathway to new relationships. 

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