Get a Better Rate: Shop Around for Loan Rates
Whenever you get a loan, you have to pay interest and most likely an origination fee (aka application or processing fee). Whether it’s for a home loan, credit card, auto loan or personal loan, you will have to pay for access to cash. And, because interest is money that goes straight into someone else’s pocket, it is obviously a good idea to shop around so that you get the lowest interest rate possible. Here are some ideas that can help you as you shop around for the best interest rates:
- Know your finances: You should have a good idea of what your financial situation looks like. This includes being up to speed on having a good credit score, and knowing what you debt-to-income ratio looks like. When you know that you have a good financial situation, you have more leverage.
- Understand the market: Take the time to find out what is average for your market. In many cases, you might find that you can get a lower interest rate than the national average if your market supports it. Sites like BankRate.com, CreditKarma.com and Money-Rates.com are great resources to research the local market and the specific financial institutions available around your area . Once you decide which financial institution to call, ask for the best rate available, rather than relying on the posted rate.
- Compare apples to apples: Make sure that you are comparing similar loan products and services to each other. Tell different lenders, as you shop around, what you are looking for and compare fees, terms and other loan characteristics that are similar. Also, consider all fees, compare APRs and get a total cost of borrowing. This will help you avoid falling in common traps used by advertisers who put a lot of emphasis on the rate only.
- Make banks compete: Once you have engaged into conversations with financial institutions, don’t just take the rate they give you. Make them work for your business. It helps to have pristine credit history, but independent of your situation, you should always try to make them aware you’re talking to several companies, and if possible, share the rates. You’ll be surprise how many of them will adapt their offer based on that knowledge. Websites like LendingTree.com and MoneyAisle.com make it easier to hit a few banks without having to pick up the phone and spend a lot of time checking in with each one.
- Let them know you are “just shopping around”: Don’t fill out a full application just yet. Be honest about your financial situation, and tell prospective lenders that you are just shopping around. It will give them more of an incentive to offer you a good deal. You can visit three or four lenders, and compare the rates available online, before you make a decision.
- Get it in writing: Ask if the potential lender can write down his or her best offer, and find out what you financial situation will need to show in order for you to get that offer.
You will always have to pay when you borrow money. But if you shop around for the best deal on your interest rate, you may not have to pay as much.