If you straight up apply for a loan without putting any effort into shopping for other loan products, then you're wasting a big opportunity for potential savings. Shopping for loans is a must-do if you want to save money, especially when you focus on interest rates.
However, if you did your shopping and managed to find a great deal, then you're lucky. But don't expect it to stay competitive over the years. This is because the rate varies constantly. Always remember that the lending market is full of lenders who are willing to go the extra mile to offer even lower interest rates and better repayment terms. Now, what does this mean?
This means that there will always be better loans, which means that you will have more room for negotiation if you want to lower your interest rates. That said, negotiating skills are essential if you want a much lower interest rate and better repayment terms. Without negotiating skills, you would be caught up in your lender's cunning and initial offers. Hence, here are some negotiating techniques to go by when negotiating with your lender.
Ask for the Same Rate That New Customers Get
The first thing you should remember is to never be afraid to ask for a better deal. Speak matter-of-factly and ask for the same rate that new customers get. Why should you ask? Lenders are willing to go the extra mile to lure in a new client. That means that they will offer a much lower interest rate to new customers if it comes to it.
This is especially true with customers with good credit scores. If you have a good credit score, an excellent credit report with no missed payments, and has a lengthy credit history with different accounts, then you're in a good position to negotiate. Not only that, but you could also bring along some documents to show proof that you are a good borrower. This would make a good impression on your lender, and they would be willing to negotiate with you for a better deal.
Determine Your Odds at the Negotiating Table
Being a loyal customer doesn't only mean being with a lender for a long time. This also means that you have been a good borrower by not making any missed payments and always being consistent with the repayment terms. It will also help if you are always following your lender's bits of advice and instructions.
If you have all of these traits, you will have a good chance of getting approved for a much lower interest rate and better repayment terms. Also, your circumstances could help you negotiate with your lenders. For example, one good way to increase your chances of winning the negotiations is that you're an owner-occupier or already owned at least 20% of your property.
Another good one is that you're a full-time employee in a good position in your company. With all of these traits combined, you already have the upper hand on the negotiating table.
Find Competing Offers
This is where your shopping comes into play. Say that you are aiming for a specific loan product in your current lender, but they aren't willing to budge. The knowledge you got from your shopping would come in handy. By shopping for other loan products, you will see loans with the same value, albeit with a much lower interest rate and repayment terms. Once you manage to find these loans, you can leverage them in the negotiations.
However, if your lender still won't budge, then you still win. Why? Because at least, you won't have to look for other loans and can go straight to the loan product that you have found beforehand. Remember that you mustn't leave yourself at the mercy of your current lender. Empower yourself with knowledge and decide to leave if you must.
This is the most important thing you should do when going to negotiate. The first thing you should prepare is how you will look in front of your lender. No, you don't necessarily have to wear a suit and tie. The key phrase here is that you have to look like you are a good risk to your lender.
Also, you should speak the part by knowing different terminology. You have to sound like you're prepared and have done a great amount of research beforehand. Of course, you also have to bring documents like your financial statements, assets, liabilities, and your recent account statements. These would prove that you are a good risk and will give you a good chance of getting approved for a lower interest rate and better repayment terms.
With the right negotiating skills and knowledge, you will gain the upper hand in the negotiating table. Not only that, you should look and sound like someone ready to negotiate with your lender. With the strategies mentioned above, you might think that you have already won the negotiation.