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Getting the Lowdown on Loans

Dec 12, 2007
When it comes to borrowing money, all of us want to repay the minimum possible. But how do we get the best possible deal? 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. This fallen rate of interest would be an area of concern for the first bank.

Creditors make a lot of profit through loans, even though an element of risk is involved. 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. Thus, its better to research for the best deal before taking a loan instead of knowing about better deals later! At least there won't be any regrets from your side later on.

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. According to me, the best loan deal embraces both these facts at an equal level. Make sure you take both of them into consideration.

Generally creditors have something "standard" to offer you. If this is different from your requirement you need to inform them. 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 the deal still doesn't come off, look for other creditors.

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. Your "need" may not necessarily be same as your "wants". 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.

Thus, working out the kind of loan you actually need and making a list of likely creditors is a precursor before going in to customize your loan deal. 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. Keep approaching a new creditor till you attain the "best" deal you desire. You have got to keep at it.
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