If there's one thing you should always do, it's look for the best deal. This is true for most purchases you'll make, but it's especially important when you take out a loan. Most people don't give it much thought, but for many people, loans are the biggest financial deal they'll ever make.
All the big things you buy will require some kind of credit. If you want to buy a house, you will have to look for a mortgage. If you want to buy a new car, you will need auto financing. If you don't already have one, you'll probably need a credit card when you travel. Almost everyone needs a lot of credit to do things like remodel their home or pay for college.
"Shopping around"
So you should look around. If we look for a good deal on a pair of jeans for a day or more, why should we take the first credit offer we get? Rates and terms for loans can be very different from one lender to the next. All of them offer many different rates at the same time, depending on the promotion you're applying for. They'll also set the rate based on how good your credit is. The most important thing to remember is that the credit market is very flexible, and most lenders will be willing to work with you on rates and terms.
You have to negotiate.
For example, if you think a rate is too high, you can just say so and ask if there's a better one. Most of the time, their first offer is not the lowest amount they will lend at. You can also offer something as security for the loan. If you own your home and are sure you can pay back the loan, you could ask what the rate would be if your home was used as collateral. You'd be surprised at how much the rate changes just because you offer security.
Mortgages
If you are negotiating a mortgage, ask for both the variable rate and the fixed rate. Most of the time, the variable mortgage will be anywhere from 0.2% to 0.5% cheaper. This is because you will have to deal with the risk that interest rates will go up. Auto financing is one of the markets with the most different options. Your dealer may offer you what looks like a good interest rate on a loan, but if you agree to pay cash, the price of the car often goes down, making the loan more expensive than it seems. If this is the case, try to get the loan from a different lender and find out how much the dealer will sell the car for cash.
One more way to make a loan cheaper is to drop extras like loan repayment insurance that aren't required. This is usually an option when you get a loan, and it can make a big difference in how much the loan costs.
