Home Improvement Is Now a Top Use of Personal Loans - Here’s How Contractors Can Profit
Home improvement projects aren’t just about fresh paint or new cabinets – they’re also about financing. A recent industry benchmark found that home improvement is now the third most common reason Americans take out personal loans (after debt consolidation and paying off credit cards). This trend sends a clear message: U.S. homeowners want and need financing for renovations, and contractors who offer it stand to gain.
In this blog, we’ll explore the data behind home improvement financing demand, explain what a captive finance program is (and its pros and cons), and show how home improvement contractors can use FinMkt’s CaptivLend solution to open a new revenue channel.
The Financing Fuel Behind America’s Remodeling Boom
Americans invest heavily in their homes. Recent figures show they spent about $827 billion on remodeling in the two years ending in 2023, and 2025 projections put spending at $608 billion. That’s a major opportunity for contractors, if homeowners can afford the work.
The average kitchen remodel costs $25,000; a bathroom remodel about $10,000. Many homeowners can’t or won’t pay that upfront. Nearly 70% plan to use financing for major projects. Surveys show 48% prefer financing over paying out-of-pocket. Whether it’s personal loans, credit cards, or home equity, Americans are comfortable borrowing to upgrade.
Personal loan balances hit a record $253 billion in Q1 2025. About 7% of personal loan borrowers—over 1.6 million people—used those funds for home improvement, making it the third most common loan purpose.
For contractors, this means your potential clients likely need financing to say yes. Offering an affordable monthly payment at the point of sale can mean the difference between “Let’s go” and “Maybe next year.” A hassle-free financing option can turn hesitation into action.
Home Improvement Loans: Why Customers (and Contractors) Count on Them
Homeowners nationwide rely on financing, even with personal loan APRs averaging 12–13% in 2025. Many prefer a fixed-term loan at 12% instead of 20%+ credit card debt. As rates ease, demand will likely increase.
This gives contractors a valuable tool. Financing helps close bigger deals faster. Contractors who offer financing see an 18% higher close rate and a 30% larger average project size (read more). When clients can spread payments, they often approve more comprehensive scopes. You’re less likely to lose jobs to hesitation or a competitor offering financing.
It’s also a customer satisfaction booster. When people get what they want without compromise, they’re more likely to be happy—and to refer you. Financing removes the financial friction and keeps the focus on project value.
So, how do contractors implement financing? Enter captive finance.
What Is a Captive Finance Company (and Why Should Contractors Care)?
A captive finance company provides loans for a specific business’s customers. It’s common in auto sales—think Ford Credit or Toyota Financial. When you get financing at a dealership, a captive lender is often behind the scenes.
In home improvement, contractors used to refer customers to banks. That’s changing. Now, mid-sized and large firms can become their own lenders through fintech partnerships. You can offer “in-house” financing with your own captive lender solution, using your capital or a partner’s.
From the customer’s view, the loan is from you, even if it’s powered by a finance partner. You provide a branded application portal, guide the client through it, and offer a one-stop solution: project + payment.
Captive Finance Companies: Pros and Cons for Contractors
Here’s a look at the captive finance companies' pros and cons in the contractor world.
Pros of Becoming a Captive Lender
1. Boosted Sales and Conversions
Financing removes affordability as a barrier. With a proper finance program, contractors report 18% higher close rates and 30% bigger projects.
2. New Revenue Stream
Instead of handing profits to third-party lenders, you capture the interest or referral income. This creates a new revenue channel beyond construction.
3. Pricing Flexibility and Promotions
You control the loan terms. You can run promotions, like 0% APR for 12 months, to increase sales or use deferred payments during slow seasons. Your captive lender financing becomes a strategic tool to close deals.
4. Faster Payments & Better Cash Flow
With point-of-sale financing, once a project is approved and underway, funds are released quickly, often in days. No need to wait until project completion to get paid.
5. Enhanced Customer Experience
Everything stays under your roof. Clients don’t need to visit a bank. They complete financing with you, which improves conversion, satisfaction, and trust.
Cons (Challenges) of Captive Finance Programs
1. Operational Complexity
Running a finance program involves credit checks, paperwork, compliance, and collections. Without systems in place, this can be burdensome.
2. Financial Risk and Capital Requirements
If you fund loans yourself, you bear the risk of non-payment. Lending ties up capital and exposes you to defaults.
3. Regulatory and Compliance Burden
Consumer lending is highly regulated. Setting up a captive finance company means managing state/federal compliance, disclosures, licensing, and legal exposure.
4. Administrative Overhead
Maintaining a loan portfolio involves statements, tracking balances, and handling loan inquiries—functions outside typical contractor operations.
Meet CaptivLend: Captive Financing Made Easy (FinMkt Does the Heavy Lifting)
Modern fintech solves most of these headaches. FinMkt’s CaptivLend is a turnkey platform that delivers the benefits of captive finance without the complexity.
Think of it as “captive lending in a box.” You get the branding and customer experience of being a lender, while FinMkt powers the backend.
What CaptivLend Offers
End-to-End Platform
CaptivLend handles underwriting, fraud detection, e-signatures, compliance, fund disbursement, and more. It automates everything from soft credit pulls to loan agreements.
No Need to Be a Bank
You don’t need lending licenses or your own capital. FinMkt’s partner banks can originate loans and even sold off, removing balance sheet burden. You get the benefits of a captive finance company without taking on financial risk.
Maintain Control & Branding
The platform is white-labeled. Your name is on the financing experience. You can configure rate tiers and create promotions.
Faster Approvals and Funding
Applications are digital, fast, and mobile-friendly. Most approvals are instant. Funds are disbursed to you in stages—e.g., upfront deposit and final payment—so your cash flow stays strong.
Compliance and Security Handled
FinMkt manages disclosures, regulatory requirements, fraud protection, and KYC. You don’t have to become a legal or lending expert.
Complementary Multi-Lender Options
CaptivLend isn’t all-or-nothing. It works with FinMkt’s multi-lender marketplace. You can reserve captive lender financing for prime customers and use multi-lender waterfall for others. One platform handles it all, with a single application process for homeowners.
Captive Finance in Action: A New Revenue Channel for Your Business
Demand for home improvement financing is rising fast. Contractors who offer it close more deals and gain revenue. CaptivLend lets you become a one-stop shop—selling both the project and the payment solution.
When you present financing during an estimate—“We have a captive finance program, this could be around $200/month with 0% for 12 months”—you’re solving the customer’s problem. You may close the deal faster and even upsell features (“Let’s also update the flooring!”).
You’re not sending them to a bank where they may drift away or see a competitor’s offer. You keep them in-house.
A Solution for Every Size Business
Whether you're a solo contractor doing $500k/year or a regional powerhouse doing $50M, fintech has leveled the playing field. You don’t need a large lending division to offer financing.
FinMkt’s CaptivLend supports companies across the spectrum—from HVAC and roofing to full-service remodelers. The platform is configurable and scalable. Start with one product, then expand as you grow.
Conclusion: Don’t Let Financing Opportunities Slip Away
Home improvement financing is no longer just for banks. Contractors who offer it gain a competitive edge. With home improvement now a top-three personal loan category, many clients are thinking about financing from the start.
If you don’t offer it, they might delay the project or choose someone who does. But if you do, you become a trusted partner helping them realize their goals.
Thanks to CaptivLend, it’s never been easier. You can enjoy the pros of being a captive finance company, more revenue, more control, more conversions, without the burden.
In today’s market, “Yes, we can finance that for you” isn’t just helpful. It’s essential.
Ready to grow your business with captive lender financing? Schedule a quick demo of FinMkt’s CaptivLend platform and see how easy it is to offer financing under your brand, close more deals, and unlock a new revenue stream.
