GreenSky Loans is a Goldman Sachs company that works exclusively with its GreenSky Pro contractors, meaning in order to get a home improvement loan you must be working with a contractor who uses GreenSky financing services.
GreenSky Loans itself is not a lender, but instead works as a go-between connecting you, the homeowner, and federally insured banks to find the best financing option for your project.
It is a different way to get a home improvement loan than you may be used to. This article will explain the differences, plus pros and cons, to let you know if this lender is right for you.
What Is GreenSky Loans?
GreenSky is a service provider for contractors and other vendors that allows them to offer their customers home improvement loans to finance their home improvement projects. Located in all 50 states, GreenSky has funded over 22 billion in consumer loans, funding everything from kitchen remodels and deck rebuilds to HVAC installations.
Unlike other personal loans, you can’t simply apply for a GreenSky loan online. Instead, everything must go through a “GreenSky Pro” (a contractor or merchant who uses GreenSky’s financial services).
The contractor will help you fill out a form, apply for the loan, and then, once the loan funds, has direct access to the GreenSky direct payment card called a Shopping Pass. This streamlines the process, helping your contractor have quick access to funds so that your project can continue without a hitch.
One small downside we’ve found with GreenSky is because everything is run through the contractor, GreenSky’s website is not marketed for the average consumer. All the information is directed at contractors, making some consumer information difficult to find. Luckily, we dove into the fine print and FAQs and found the most important information you need before you sign up for a GreenSky Loan.
How to Apply for a GreenSky Home Improvement Loan
If your contractor or vendor has offered you a home improvement loan through GreenSky, then applying is easy. To start, all you need is to be at least 18 years old and have a U.S. address, social security card, and driver’s License.
If you fit those basic criteria, the contractor can take a picture of your driver’s license and the loan application will auto-populate.Then you just add in some pertinent information like your Social Security number, annual income and requested loan amount and then the application is complete.
From there, GreenSky will approve or deny your application after a check of your credit history and possibly even fund the loan the same business day.
Even if you are initially denied, GreenSky will automatically send you an alternate offer called an Instant Counteroffer (ICO). This is a nice feature for those with less than perfect credit as it doesn’t require another hard credit pull that might hurt your credit score.
How Does the GreenSky Loan Work?
A GreenSky Home Improvement Loan works differently than a personal loan that other online lenders offer because it functions more like a credit card than a lump sum loan.
Basically, once you’re approved for a loan, you receive a virtual GreenSky direct payment card called a Shopping Pass. This 16-digit pass works like a credit card with the contractor submitting expenses for approval. Then, GreenSky sends a text or an email to you for authorization of the purchase and once authorized, the expense is paid for.
While you do apply for a loan amount and thus have a credit limit, you don’t have to take all the money out at once and are only responsible for what you spend on your home improvement project. Keep in mind that GreenSky will decline any purchases that are not directly related to the home improvement project.
From there you have four to six months (depending on the loan’s terms) to use the card for home improvement purchases.
Types of GreenSky Loans
When it comes to your actual loan, GreenSky will offer you several choices, depending on whether you’re what GreenSky calls a “cash buyer” or a “budget buyer.” Basically, GreenSky has loans that are beneficial if you’re planning on paying off the loan quickly or loans that have lower interest rates if you’re planning on paying the loan off a little bit at a time.
Your contractor should go over all your loan options with your specific monthly payments and interest rates, but a basic understanding of the different types of loans offered will help you make an informed decision.
GreenSky Deferred-Interest Loans
Higher interest than other options
A deferred-interest loan works by deferring the interest until after a set period is over. While this means you might be able to avoid paying interest, that doesn’t mean the interest doesn’t exist.
Basically, during the promotional period, interest is billed to you, but you’re not responsible for paying for it until that set period is over. If you pay off the loan during the promotional period, the interest is waived and you avoid paying interest at all. But if not, you’ll have to pay all the interest that accrued so far and anything that continues to accrue after.
Each billing period, the bill will show the loan balance, the interest billed (even if you’re not responsible for it yet), and the date that the promotional period ends. This allows you to keep track of the interest even if you’re not responsible for it yet.
Some GreenSky deferred-interest loans require minimum payments during the promotional period and some don’t – just pay attention to your specific loan terms to understand your specific loan. Keep in mind that paying the minimum payment will not pay off the loan before the promotional period ends, so you’ll need to pay more than the minimum payments to avoid paying interest.
GreenSky’s website doesn’t specify actual interest ranges, but we found several published rate sheets for GreenSky merchants. The rates are competitive but on the higher side. So, while it’s a great choice if you’re planning on paying off the loan during the promotional period, you might end up paying lots of interest if you don’t.
GeenSky Reduced-Rate Loans
Up to 12-year repayment period
APR 0% to 11.99%
With competitive rates and long repayment periods, a GreenSky Reduced Rate Loan might be a good option if you know you can’t pay off your loan quickly.
While GreenSky does claim to offer interest free loans for people with good credit, most everyone will end up with an interest rate of some kind. GreenSky’s website doesn’t list specific interest rate ranges, but several published rate sheets for GreenSky merchants show rates ranging from 5.99% to 11.99%.
We’d love more information on the GreenSky website itself, but these rates are competitive and we like that the GreenSky Pro should walk you through all your options including the specifics on your monthly payment before you officially sign for the loan.
Just remember that both types of loans have a $39 origination fee that is charged with your first monthly payment.
GreenSky Split-Rate Loans
Splits loan into two separate loans
Deferred interest and low interest rates
A GreenSky Split-Rate Loan allows people to split their total approved credit limit into two separate loans: a deferred interest loan and a reduced rate loan. With this loan, most people plan on paying off the deferred interest portion during the promotional period. This capitalizes on the promotional 0% interest then the remaining loan has a lower interest rate that can be paid off more slowly.
A GreenSky Split-Rate Loan specifically works for energy projects like solar panels because most people expect a tax break or rebate with installation–which they then use to cover the deferred interest loan.
Just remember you are getting two separate loans, and you’re obligated to pay for both regardless of whether you end up getting the expected tax break or rebate.
Alternatives to GreenSky Loans
If you’re not working with a GreenSky Pro or simply want to look at other options to cover your home improvement costs, check out some alternatives below or read our best ways to finance your home improvements.
Home Equity Loan
A secure loan like a home equity loan might be a good option to cover your home improvements for a lower cost. Because home equity loans use your home as collateral you often get lower interest rates which can make borrowing more affordable. The downside is your house is at risk, so as always we suggest you read the loan documents carefully to understand what you’re signing up for.
Other Personal Loan Lenders
It’s always worth shopping around to see what rates you can get from other lenders. While most personal loans are specifically for home improvement projects, you can simply apply the loan to your project. Many online lenders also allow you to pre-qualify so that you can check their rates ahead of time without affecting your credit score, making it easy to compare different offerings.
If you’re looking at a smaller project, a credit card might cover your home improvement expenses. Many cards offer 0% interest during a promotional period much like GreenSky, but unlike GreenSky, you’re not penalized with retroactive interest if you don’t pay off your loan from the promotional period. Make sure to read the fine print if you go this route because many credit cards have high APRs after the promotional period.
Pros and Cons of GreenSky Loans
GreenSky can be a great option if you’re planning on financing a home improvement project and paying it off during the promotional period. We love the possibility of a zero-interest loan and even the reduced rate loans have competitive rates. Just make sure to check your loan documents carefully so you understand your payment schedule and any fees you might experience.
Below is how we believe GreenSky Loans stacks up as a whole to help you decide if taking out a home improvement loan with GreenSky is right for you.
Loan funds quickly, even same day
Option for zero-interest if you pay the loan balance off in promotional period
Joint loan offered
No prepayment penalties
Prequalifying possible if you want to avoid a hard credit pull that affects your credit score
Must use a GreenSky contractor
$39 activation fee
Website is geared toward the contractor
Frequently Asked Questions (FAQ) About GreenSky Loans
If you’re still wondering about GreenSky Home Improvement Loans, check out our answers to the most commonly asked questions.
GreenSky does not have a disclosed minimum credit score, but typically a fair score or above is required. This doesn’t mean that you can’t apply with bad credit, just know that you might get a higher APR or be denied altogether.
If you have a bad credit score, GreenSky does have an Instant Counteroffer service that might be helpful. In short, if you’re denied for the loan you asked for, they’ll send a counteroffer as another option, all offered without a second credit pull.
We love that GreenSky has this offer for those with bad credit, but ultimately the better your score the better your offer from GreenSky. If you’re looking to improve your score, check out these ways to improve your score this year.
Goldman Sachs acquired GreenSky, LLC in 2021. While Goldman Sachs owns GreenSky, the actual financing of GreenSky’s loans goes through many different federally insured banks throughout the country.
The short answer is yes. The long answer is more complicated. GreenSky has done a lot in the last few years to earn the trust of its customers, but GreenSky has run into some trouble in the last couple years.
In 2021, the Consumer Financial Protection Bureau (CFPB) brought a suit against GreenSky for allowing contractors to take out loans for their customers without the customers authorizing them. In short, people were having loans taken out in their name by their contractors without their knowledge or consent.
CFPB believes that GreenSky was at least aware of the problem and did not take the proper actions against it. CFPB is requiring GreenSky to refund or cancel 9 million in loans, pay a $2.5 million civil penalty, and create new procedures to avoid it happening in the future.
Now, GreenSky training materials remind merchants repeatedly that they can’t request a loan without a customer’s consent. It’s obvious that GreenSky is doing its best to prevent any future problems.
Contributor Whitney Hansen covers banking and investing for The Penny Hoarder. She also writes on other personal finance topics.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.