Who Doesn’t Love A Good Bargain?
Many people love a bargain; many modern shoppers are reviving the pride our grandparents felt in finding amazing deals. With the rise of discounted-goods outlets and the mainstreaming of thrift, vintage, and resale stores, a good deal is within most everyone’s reach. If you are into the haggling and auction scene, you know better than most the kinds of amazing buys you can get by being just a little assertive in your shopping habits.
Why are we not as assertive in our loan shopping habits?
It may be that we are assertive in some aspects of our loan shopping, but not in the right areas. David Osborn and Paul Morris wrote a book, Wealth Can’t Wait, which climbed to the upper tiers of the New York Times best-seller charts. They claim that people will often negotiate the price of the house they choose to buy, but they never even consider negotiating with their lender.
“If you negotiate down one-eighth of (an interest-rate percentage) point and live there 30 years, it could be $50,000 in savings. You should negotiate harder over the money than you do over the price of the house.”
Miron Lulic, the founder and CEO of the financial-services platform SuperMoney, said that few people negotiate their car loans either. Citing the Federal Reserve, Lulic said that 76% of buyers negotiate the price of the car, but only 31% negotiate their loan on the car. Dealers know that buyers will often focus on the payment, not the total cost of ownership. The dealer’s finance office can hide ballooning payments from prospective buyers farther down the road, unless the buyer is savvy and pays close attention.
To save money on any loan, including home, auto, and personal loans, start by shopping around. Most consumers should try to apply with at least two different lenders, say Osborn and Morris. The chief financial analyst at Bankrate, Greg McBride, agrees.
“Doing so gives you a couple of advantages. One, it helps you sort out who’s got the best deal. And it also gives you somewhat of a bridge in negotiating things like rates and fees paid,” McBride says.
He also suggests applying to these different lenders in the same day, but don’t stress about the multiple credit inquiries hurting your credit scores. Multiple inquiries within one thirty-day period are treated as one, in most cases.
Regarding home loans and mortgages, McBride warns consumers to watch out for so-called “junk fees.” Morris and Osborn concur, specifically naming high processing fees or delivery charges.
“Are they entitled to a $100 processing fee, sure. One thousand dollars? That’s excessive,” said Morris.
Osborn provides a second tip to savvy consumers: if a mortgage lender says there are no closing costs, or insanely low closing costs, it is likely that the lender is charging a higher interest rate to make their money.
For auto buyers, one thing to realize is that the average new-car loan term is running close to six years (70 months) these days. Lulic recommends looking into refinancing an expensive car loan after a few years. “You can save a ton of money, maybe even shorten the life of the loan,” he says.
For many consumers, there is no harm in negotiating lower interest rates and better terms. It’s a fact of life that you need credit in this modern age, but that does not mean you need to go bankrupt to have the life you want. Be smart, be savvy, and fight for your rights to affordable, appropriate loan terms.