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When you apply for a loan, you’re basically putting yourself at the mercy of the lender. After all, it’s hard to bargain from a position of power when you’re asking someone to lend you money. Because of this, many borrowers don’t understand that they could be getting better interest rates than what they ultimately settle for. How’s this? Well, let’s take a look at three different types of loans, and see what we can come up with.


1. Home Loans


For most of us, a home loan is far and away the most expensive loan that we’ll ever have to deal with. As such, we tend to try to “shop around” for the best rates. This is all well and good, except that shopping around involves more than just walking into different lending offices and telling them to make you an offer. Photo: www.nytimes.com


The first thing you’ll need to do is determine your credit score. You can do this by having a lender make an inquiry (if you visit multiple lenders, you can share this information between them, rather than having each one make a separate inquiry, which could actually have a negative impact on the score itself). When speaking with lenders, have them help you determine the best time to close on the house, so that you can lock in lower interest rates. Also, be sure to ask about any additional fees, so that you don’t end up getting hit with costs that you weren’t aware of. Next, discuss the option of paying points. Paying points can help lower your interest rates at the cost of higher upfront charges.


The most important thing here is finding a lender that you can trust, so that he or she can guide you to the best options for your circumstances. Ask around between friends and family for possible lender recommendations.


2. Business Loans


There are many factors that go into determining the interest rates for business loans. The type of business being funded will play a part. Riskier businesses will have higher rates to help make up for the higher failure potential, while safer businesses will enjoy lower rates. The size of the loan itself will also have an effect on the rates, with larger loans resulting in lower rates overall. Also, as with most loans, the personal credit score of the borrower will be taken into consideration. So, what can you do to improve your rates? You can start by improving your credit score. Also, consider that foreign banks tend to offer lower overall rates, so you could consider trying to get a loan through a lender outside of the United States.


3. Automobile Loans


Car loans generally come from one of three places: Banks, automakers, and credit unions. As such, the first thing you should know when borrowing money for a car is that most dealerships are happy to set up loan for you from any one of these sources. But in doing so, they’ll be sure to include their own cut in the overall costs. It is often recommended that you contact a lender on your own before you ever visit a dealership, so that you can work out a fair lending deal without having to get the dealership involved. However, that isn’t to say that you should automatically avoid getting your loan through the dealer, because dealerships may sometimes offer specialized low rates from automakers, such as zero-percent financing. Aside from your choice of lender, the loan rates can also be affected by whether you’re buying a new car or a used one (new cars often have lower rates), the length of your loan (longer loans usually have higher rates), and your credit score. So, if you plan on using a loan to buy a car, do what you can to improve your credit, consider all of your lending options, and try to sign up for the shortest term length you can afford.


It’s certainly true that many of the factors that determine loan interest rates are out of your control. But by understanding the factors, you’ll be able to better position yourself to be able to get the best possible rates for your situation.

Lee Flynn is from the Wasatch Mountains near Salt Lake City, UT. After Lee spent years preparing himself, his home and his family, he decided he had to do more. In his free time, Lee helps educate those who want to do the same. Through small local workshops and articles, Lee trains and teaches others on home preparation, food storage techniques, wilderness survival and self reliance. After obtaining a bachelors degree from the University of Utah, Lee moved to the Salt Lake Valley where he now lives with his wife and daughter.



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Photo: www.nytimes.com