Retailers starting to offer home insurance, mortgages

December 19, 2012 8:19:36 PM PST
Now on sale in aisle one: eggs, milk, bread -- and a mortgage? A growing number of retailers are getting into the banking business. But is it right for you?

First-time homeowner Lilly Neubauer is always looking for ways to save dough.

"At the beginning of this year, we were seeing historically low interest rates and we had heard that refinance was a great option," Neubauer said.

So she headed to Costco, where she picked up groceries, home insurance and a mortgage!

Think of it as the next generation of one-stop shopping. A growing number of retailers, including Costco, Walmart, Sam's Club, and Home Depot, are going beyond the basic store credit card by offering exclusive deals on a slew of financial services.

"Mortgages, home equity loans, home improvement loans, life insurance," said Tom Feltner with the Consumer Federation of America.

Even home and auto insurance are also being offered, depending on the store.

Feltner says with nearly 10 million U.S. households without bank accounts, and credit from conventional lenders tight, these retail services may offer a sense of comfort.

"Consumers are drawn to the simplicity of a transaction that in previous products, there was much more of a barrier to entry," Feltner said.

At Sam's Club, the company's small business loan program is devoted to customers who do not qualify for traditional bank loans. Since 2010...

"We've had over 1,000 members qualify. The average loan size is around $11,000, so that's putting over $11 million into the hands of small businesses that otherwise would not have had," said Catherine Corely with Sam's Club.

"They're targeting customers who are looking to complete transactions very quickly and at the point of sale, and I think in many ways that puts the onus on consumers to make sure that they're getting the best deal," Feltner said.

So shop around, read all terms and conditions carefully, and don't forget to compare things like premiums, interest rates, closing costs and general fees.

"It's important for consumers to look at their own household balance sheet to determine whether or not these products are going to make sense for them," Feltner said.

Retailers are partnering with financial institutions and insurance brokers to offer these deals. That means when it comes to things like mortgages and home equity loans, you're still putting up your home as collateral.

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