Getting the Lowdown on Loans
By: Ajeet Khurana
Isn't getting the best rate possible the prime attraction while borrowing money? In my opinion, people are always looking out for cheap rates. Whenever I'm asked a question like this, I always look at it from the creditor's perspective: the competition for loans is huge. Take your average high street bank, for example, and let's pretend for a second that another bank has just opened up opposite them. The new bank offers loans at a lower interest than the current one. Seeing this trend, I would be worried if I'd been working in the first bank.
Creditors seldom undergo a loss while lending money. So by shaving a fraction of a percent off of the interest rate the bank opposite would quite happily draw in a good number of the first bank's customers. That's bad for business, so the first bank lowers their loan rates to match, and throws in a free gift. The price wars are similar in some respect to those in supermarkets. But I doubt you spend quite as much on your groceries as you do on taking out a loan. That's why its advisable to get the best loan deal at the first go, instead of repenting about the deal that you took months or years later.
When you try to get a loan, there are two things you should remember: what's the best deal for someone else is rarely the best deal for you; and they WANT you to choose them over every other creditor out there. Both these factors need equal consideration if you are looking for the best loan deal. Don't ignore either of them.
Generally there is a vast difference between the borrowers' requirements and the creditors' offer. Try and bridge the gap through discussions. If you need X from your loan, but aren't so keen on the Y they're offering, talk to them about changing it to Z. X, Y and Z can be anything, from a low interest rate, to quick payment, or perhaps being flexible about credit history. If there are no exciting deals, look elsewhere.
The second rule is that, what with the huge number of creditors out there, you don't need to spend hours trying to squeeze every last perk from one loan if another creditor offers everything you need. Need and "want" might be two different things. Do a little research in to how much you can realistically hope to pay back per month, how much money you really need, and anything else that you can use to make sure you get what you want, and not what the creditor thinks you want.
To conclude, analyze the sort of loan you require and approach likely creditors to customize the loan deal for yourself. Remember that you can always use companies against each other by suggesting that the other creditor was willing to give you a better deal, and ask what they can do to better it. Don't waste your time over unfavourable offers. Move on to the next one from a different lender!
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