Who's really in charge when you apply for a loan?
See if this doesn’t sound like a typical scenario:
You contact a bank or credit union and ask them for a loan. Then, if you have average/good credit they call you back and let you know (out of the goodness of their hearts, of course) that your request has been approved. They then go on to explain the terms and conditions under which the approval is based. They’re very nice about it, and everything is cool, right?
Somewhere, we lost sight of who is doing whom a favor. Financial institutions make money on interest… it’s their bread and butter. If you have average to good credit, you are doing them the favor, not the other way around. You have the right to ask questions and try to get the best loan for you.
A few things you should consider negotiating are:
Term: There is no law that a loan has to be 12, 24, 48, or whatever months. Remember, the longer the term- the more money it costs you. If you have a payment amount you are comfortable with, ask them to get as close as possible. Sometimes shortening the term will also lower the rate. In any case, it will definitely lower the amount of interest you pay. (Note: You still have to be reasonable. No one is going to give you a $150 loan for 10 years with a miniscule payment.)
Due date: Tradition has it your payment is due one month from the day you sign the papers, and on the same day every month after that. If that happens to fall when the rent/mortgage payment is, or when a bunch of credit card payments are due, it can really mess up your cash flow. (Two weeks of pancakes and water and two weeks of surf-n-turf is not a good budget!) Get the due date when you want it.
Rate: There is a little less wiggle room here, but there can still be alternatives. The rate can sometimes be lowered if you have additional collateral. We mentioned earlier, shortening the term may also affect the rate. You might even look at consolidating a couple of bills to get a lower rate overall. Maybe it will help, maybe it won’t… but it can’t hurt to ask.
Finally, each institution has their own policies, so the degree of customization will vary. And if you’re asking why we’re willing to share this with you, we’re just trying to live up to our mission of, “Doing the Right Thing.”