What Market Uncertainty Means for Future Customer Financing in Home Improvement and Dental

Market uncertainty – it’s the phrase on everyone’s lips these days. Inflation is up, interest rates are volatile, and consumer debt is hitting new highs. If you’re in the home improvement or dental industry, you might be wondering: How will this economic rollercoaster affect my customers’ ability to finance big projects and treatments?

In this post, we’ll break down the current macro climate and its impact on customer financing, and then dive into tactical strategies to navigate these choppy waters.

The Macro Climate Shift

We’re living through a macroeconomic whiplash. After a post-pandemic boom came surging inflation and aggressive interest rate hikes, and now a tentative cooldown. Here’s the snapshot:

• Inflation vs. Cooling Off: U.S. inflation spiked in 2022 but has since dropped below 3% as of late 2024. Still, prices overall remain high, and core inflation is proving sticky in many categories.
• Interest Rate Volatility: The Fed raised interest rates aggressively to fight inflation, causing borrowing costs to surge. Average credit card APRs climbed to over 22%. While rates began easing in late 2024, they remain historically high.
• Record Consumer Debt: American consumers hit $18 trillion in total debt by Q4 2024. Credit card balances alone reached $1.21 trillion. Monthly debt payments rose 5.2%, straining household budgets.
• Tightening Credit Markets: Lenders are more selective, especially with borderline borrowers. Rejection rates for credit applications rose to 21% in 2024, the highest in a decade. Lenders are pulling back from subprime markets and limiting promotional credit offers.

Why Financing Is Getting Harder for Customers

If your approval rates have slipped recently, you're not imagining it. Financing is harder to get, and here’s why:

• Shrinking Risk Appetite: Lenders are adjusting credit models and approving fewer applications. They’re more risk-averse, especially with borrowers in the near-prime and subprime segments.
• Higher Rejection Rates: Consumers are getting turned down more often. Even those with solid credit scores are finding it harder to qualify as lenders raise the bar.
• Flight to Prime: Credit tiers have shifted. Someone who qualified for a prime lender in 2022 might now fall into near-prime. Financing is slipping out of reach for many middle-tier borrowers.
• Limited Offers: 0% and low-interest promotions are being reduced or limited to only the most qualified borrowers. Lenders are also decreasing credit limits and tightening term flexibility.

Tactical Strategies to Stay Ahead

Economic uncertainty doesn’t mean throwing your hands in the air. It means adjusting your sails. Here are four strategic ways to stay ahead:

1. Repackage Big Projects into Smaller Phases

Smaller is more financeable. Instead of quoting one $30,000 kitchen remodel, break it into phases: floors now, cabinets later, countertops next quarter. Same goes for dentistry. Offer single-tooth implants or prioritize critical care first.

Why it works: Smaller amounts are more likely to get approved and easier for customers to commit to. It also provides psychological relief. One piece at a time feels manageable.

2. Keep Communication Tight with Lenders

Avoid surprise denials by staying ahead of policy changes. Schedule regular check-ins with lending partners to understand shifts in credit criteria, new product availability, and any upcoming changes.

Train your sales or office staff to pre-emptively gather needed documentation (proof of income, employment verification) and set expectations early. This ensures a smoother process and less friction at the point of sale.

3. Diversify Lending Options

Single-lender dependency is a risk. If they tighten, you’re stuck. A multi-lender model gives you a broader credit spectrum. Consider implementing waterfall financing, where an application automatically flows to the next lender if the first declines.

This improves approval rates, simplifies the customer experience, and reduces your back-office burden. Customers fill out one app; the system finds the right lender.

4. Consider Becoming Your Own Lender

In-house financing isn’t just for automakers. More home improvement and dental businesses are exploring embedded finance or partial in-house programs for known, repeat customers.

This lets you:

• Retain control over terms
• Offer more flexible payment plans
• Capture interest revenue

It comes with risk, of course. Defaults, compliance burdens, and cash flow management all require careful planning. Start small: cap the amount or offer it only to long-term customers. Partner with fintech platforms to handle the heavy lifting.

Source: Golden Proportions Dental Financing; Deloitte Embedded Finance Insights.

Looking Ahead: Planning for the Next 12–24 Months

What’s the outlook?

• Rates may ease if inflation continues to cool, potentially unlocking more favorable financing conditions.
• Consumer spending could slow, weighed down by high debt loads and cooling wage growth.
• Delinquencies may rise, prompting lenders to remain cautious even as rate cuts occur.

So what should you do?

• Expand your lender network now, not later.
• Invest in seamless application experiences – fintech platforms, instant decisions, and soft credit checks can make a big difference.
• Educate customers on financing options early, including prequalification tools and payment estimators.
• Keep your finger on the economic pulse – stay informed so you can adjust your financing strategy in real-time.

The financing world is changing fast. Those who adapt, diversify, and communicate well will not only survive but grow.

Because whether it’s a new roof or a restored smile, customers still need what you offer. They just need a smarter way to pay for it. Let’s help them get there.

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