5 Ways to Get the Lowest Interest Rates

How to Get the Lowest Interest Rates

Sometimes you need to take out credit.

You might, for instance, want to buy a house, finance a car, or start a business, and can’t do so out of cash reserves alone.

Naturally, you want to borrow at the lowest price possible.

Unfortunately, going into debt can be expensive.

Even though primary interest rates are low, fees charged by lenders can be much higher, particularly if they designate you “high risk.”

Throughout the loan, you can sometimes end up paying more in interest fees than you borrow.

Fortunately, though, there are several ways to improve the rates lenders offer you.

Here are some insider tips from bankers who know how the game works.

Compare Interest Rates Across Lenders

Just like in any other market, the price of borrowing varies across lenders.

Some charge a fortune while others offer lower prices.

Working out how much you will pay in interest is easier today than it was in the past.

Historically, you had to apply for loans with each creditor individually before finding out how much it was going to cost.

Now, though, you can hop onto price comparison websites, enter a few details, and then see how much you are likely to pay.

If you’d prefer to compare interest rates in-person, you can go to an independent broker.

These professionals don’t work for any particular creditor.

Instead, they help you discover your options and which lender offers you the best value for money.

Most brokers can tell you how much you’re likely to pay in interest for various products (like mortgages) in days, if not hours, giving power to you.

Once you discover the best rate, you can use it as a bargaining chip to further reduce costs.

Go to the first lender and promptly inform them that a second is offering a cheaper rate and see what they say.

Sometimes, they will improve their initial offer.

Please don’t spend hours filling out numerous credit applications and forms.

Not only does this waste your time, but it will also hurt your credit score.

Either use a broker to conduct investigations on your behalf or use comparison websites that guarantee no impact on your credit report.

Be A Long-Term Customer

Customers break off relationships with lenders all the time in their quest for better deals.

It is rare, therefore, for banks to enjoy long-term relationships with their clients.

When they do, they’re keen to hold onto them, especially if they have an excellent repayment history.

Sticking with a lender long-term demonstrates your loyalty and proves you are low-risk, thus bringing down interest rates.

Incentivize Bankers To Give You Their Best Interest Rates

Banks, like any other business, need to make money.

Their goal is to sell you the most expensive loans you can afford and generate the fattest interest payments.

However, lenders will slash their rates if you can present yourself as the ideal borrowers.

But how do you do this?

Introduce Friends And Family To The Lender

Lenders know that the best way for them to drum up new business is through word-of-mouth marketing.

Customers who introduce friends and family to their services are highly valuable to them.

If banks have a thriving relationship of mutual benefit, they may offer you lower rates of interest as a thank you for the business you bring them.

They won’t want to charge you a lot of money for loans, just in case it ticks you off and you go elsewhere.

Trying to extract extra money from you isn’t worth the risk.

Furthermore, banks want to develop relationships with people who have a lot of social connections in the community because of the extra business they bring.

Builders, brokers and business people often get better rates if the lenders believe they will send referrals.

Usually, the bank’s interest is to offer market-beating prices because of the extra revenue the relationship will generate.

Have A Great Credit Score

When it comes to low interest rates, there’s no substitute for a good credit score.

It is the first thing lenders will look at when deciding how much to charge you for borrowing.

If you have a good credit score over 750, you should be able to access the lowest rates.

Indicate You Might Use More Lender Services In The Future

Finally, banks are likely to offer you the best interest rates if they believe you will use additional services in the future.

For instance, you may currently have a personal account with a financial institution.

You could indicate to the manager that you are thinking of moving your business accounts over too.

The person dealing with your case then has a reasonable justification for offering you a cheaper deal.

Make Sure Your Credit Report Is Accurate

You can use all of the tactics discussed above, but if your credit score is weak, you’ll always pay more, no matter how much you haggle.

Improving your credit score, however, is just a process.

Once you understand the principles behind it, you can increase your numbers rapidly.

Don’t Apply For Credit Too Often

Applying for credit too often is one of the best ways to crater your credit score.

Credit rating agencies see your attempts to obtain credit and then pass this information onto lenders.

Banks and loan companies conclude that you’re either rate shopping or there is some other reason why people don’t want to lend to you.

Where possible, shop around for the best rates without filling out credit applications.

If lenders refuse two requests in a row, stop applying and look for other ways to improve your score.

Fix Negative Information And Errors

Credit reports aren’t always perfect.

Sometimes, rating agencies and financial institutions make mistakes, and these can adversely affect your score.

According to investigations, 26 percent of credit reports contain errors, many of which are detrimental to credit applications.

Fixing errors and requesting agencies remove negative information on your credit report is straightforward.

If you spot an error, write a letter to the leading rating agencies in Canada, Equifax, and TransUnion, explaining where the report is wrong and how they should fix it.

Legally, the reporting agency must answer your letter and tell you what they are doing about your situation.

If they refuse to fix the problem, you can complain to the Ministry of Government and Consumer Services.

Sometimes, you cannot remove derogatory information from your credit report.

Legally, consumer proposals and bankruptcies must remain in place for a period of time set by statute.

Always Pay Bills On Time

Thousands of companies report into credit rating agencies, not just banks.

Mobile telephone networks, gas companies, and local authorities will all submit information concerning your financial behaviour.

If you always pay your bills on time, your credit report will paint a rosy picture.

You will appear as somebody who is solvent and able to meet all their obligations on time.

If you pay late, however, your credit report will present you as somebody who lenders cannot trust, and your score will decline.

Turn Yourself Into The Ideal Borrower

The best way to get rates down is to put yourself in the lender’s shoes and ask what kind of person they would like to lend to.

In general, creditors don’t want to take huge risks with their money.

Instead, they look for people with specific characteristics that make them more likely to repay the principal with interest.

What sort of things can you do, then, to prove you’re a good candidate for a loan?

First, you will want to demonstrate that you have a high and stable income.

The more consistently you can make money, the better.

It shows the lender that you will be able to make repayments every month, without falling short.

Next, you’ll want to present yourself as a stable person who can hold on to a job.

Creditors will often look for evidence of long-term employment, preferably with a single company.

People who have been in roles for five or ten years are more conscientious and, therefore, more likely to repay a loan.

Also, try to present yourself as someone who has business potential for the lender.

Like any other business, financial institutions are on the lookout for the most lucrative customers.

For instance, if you’ve just graduated as a lawyer, tell them.

There’s a good chance that your income will rise substantially throughout your career, thereby helping them earn more money from you in the future.

You can also talk about other revenue-generating possibilities in your life, such as requiring a mortgage for a new home or a car loan.

When in discussions with your lender, be open and honest with them.

They will respect your candour.

It will put them at ease, making it more likely that they will want to engage in a financial relationship with you.

Be clear about your intentions.

Show them that you are willing to walk away from a deal that doesn’t offer you acceptable terms.