GreenSky is a technology company that facilitates home improvement loans up to $65,000. Its loans are funded by banks and offered to consumers through home improvement contractors, merchants and retailers who use GreenSky’s financing platform.
For borrowers who take GreenSky’s deferred interest loan and pay it off during the promotional period, GreenSky is a fast and inexpensive alternative to other options for financing home improvements.
What to know about GreenSky:
- You need good to excellent credit. GreenSky’s average borrower’s credit score is 768, according to the company. It allows co-signers, which can improve your chances of qualifying.
- Loans with deferred interest are interest-free — but only if you pay them off during the promotional period. Consumer complaints about GreenSky show that not everyone fully understands how deferred interest works.
- You can use the money only for home improvement projects with merchants or contractors enrolled in the GreenSky program. Purchases unrelated to home improvements are declined.
GreenSky product details
|Loan amounts||Up to $65,000.|
|Repayment schedule||Deferred-interest loans: Promotional period followed by 7 years.
Reduced-rate loans: 5, 7, 8, 10 or 12 years.
|Fees||Account activation fee: $39 at time of first purchase.|
|Time to funding||Same day.|
|How to qualify||
GreenSky is not a lender; rather, it’s a financial technology company that partners with banks to originate loans, and with home improvement contractors, merchants and retailers to provide point-of-sale financing.
The company says it works with 15,000 merchants across the U.S. and has facilitated $16 billion in loans since 2012.
How GreenSky works
Let’s say you’re remodeling your kitchen and the contractor doing the work offers financing through GreenSky. To apply via the mobile app, the merchant or contractor submits a scanned photo of your driver’s license barcode to GreenSky, which then auto-populates a loan application. You add your Social Security number, annual income, email address and requested loan amount. The process takes about 45 seconds to complete.
Once the application is submitted, GreenSky does a hard credit pull. Then, you receive notification that you’ve been declined or approved and details of the loan offer.
If you accept the offer, GreenSky sends your loan documents via email and regular mail. The documents include a 16-digit “shopping pass” you use to pay your contractor through a point-of-sale terminal.
Customers receive a credit limit that they can spend up to. Most home improvement costs qualify, including kitchen and bathroom remodels, HVAC installations, foundation repairs, flooring, windows and pool installation.
Deferred interest or rate reduction
Merchants that partner with GreenSky may offer a deferred-interest or “no-interest if paid in full” option, or a rate-reduction option.
Deferred-interest loan: GreenSky loans with deferred interest accrue interest charges during a promotional period of six, 12, 18 or 24 months. If you pay off the entire balance before the promotion period ends, you pay no interest. If you don’t pay it off, you pay the interest charged during the promotional period, plus interest that accrues on the balance thereafter, over a period of 84 months.
In 2017, financial advisor Kevin Mahoney took a GreenSky loan with 18 months deferred interest to pay for foundation repairs at his Washington, D.C., townhouse.
“We are paying off the loan incrementally, making sure it’s fully paid off before the promo period expires,” Mahoney says. “The terms can have real consequences if you don’t have a strong plan in order.”
GreenSky claims 90% of borrowers with deferred interest loans pay off the loan prior to the end of the promotional period, so they do not pay interest charges.
Reduced-rate loan: If you need longer to repay the loan, you might be offered a loan with a lower APR and repayments up to 12 years. The rates range from 0% to 26.99%, according to GreenSky.
GreenSky pros and cons
No-interest loans: GreenSky’s deferred-interest loans are effectively 0% interest loans if the balance is repaid in full within the promotion period. It’s a good option if you know you can repay the balance in full.
Fast funding: GreenSky loans are originated at the point-of-sale, so you can get financing from a contractor or merchant almost immediately — faster than getting a personal loan, which can take a few days, or a home equity loan or line of credit, which can take several weeks.
Hard credit pull: GreenSky doesn’t pre-qualify applicants; its loan application process includes a hard credit inquiry, which can have a negative impact on your credit score.
Deferred-interest promotion can have consequences: Failure to pay off the loan balance during the promotional period could result in high interest costs over a long period of time.
Negative reviews and lawsuits: GreenSky more than 250 complaints in the Consumer Financial Protection Bureau complaint database, with customers reporting billing issues and confusion over the deferred interest promotion.
GreenSky says the number of complaints are small compared to the number of customers it has served; it says it’s approved 2.2 million consumers since 2012.
GreenSky was also sued twice in recent years for deceptive business practices by contractors using its financing platform. The company settled both suits and agreed to make several changes to its business practices, including how it assesses prospective contractors.
Alternatives to GreenSky
GreenSky is one option for financing home improvement costs. Consider these alternatives before deciding:
Credit cards: If you have excellent credit and a smaller home improvement project, you can apply for a 0% interest credit card to cover the expenses. If you qualify, you’ll pay no interest charges for a promotional period, typically 12 to 18 months.
Home equity loans and HELOCs: If your credit isn’t great and you have equity in your home, consider a secured loan.
Home equity loans and home equity lines of credit have lower rates and longer repayment terms. The risk is you can lose your home if you fail to repay the loan.
Personal loans: If you don’t have a lot of equity in your home or you would rather not rack up credit card debt, consider a home improvement loan. These loans are unsecured, with fixed rates and payments, and usually are funded within a week.
» MORE: Compare home improvement loans
Cash-out refinancing: You can refinance your existing mortgage into a higher loan amount and use the difference to pay for your renovation. Rates vary by lender, loan amount and the equity in your home. The interest payments on all types of home loans are usually tax-deductible.