Why does everyone else get a better loan rates?

Almost everybody you know has debt, it’s quite impossible to live a modern life without credit cards, loans, mortgages, and so on. And, when you discuss your debts with your friends or co-workers, it may appear that everybody else got better deals and lower rates than you.

First of all,  things are not always how they appear: many people do not feel comfortable discussing their financial situation, and they prefer to leave the impression that they’re doing very well, when in fact they’re struggling just like you. So, don’t believe everything you hear, and don’t jump to conclusions. There are however several factors that impact your credit rates, and you can learn how to use these factors to your advantage, by learning from people who got better deals.

 Better Credit Score

Since lenders use the credit score to evaluate you, as a client, a higher score leads to a better deal. But there’s more to it: if you ask people who have good loan rates about their score, you’ll notice not only that they have a good one, but also that they know exactly what that score is, and they have a good estimate of how it will evolve in the future. Make it a habit to check your score at least yearly; understand the factors that have an impact on it, keep track of your mistakes and avoid repeating them, and you will see results.

Down Payments

When you compare your rates against others in the same situation, don’t forget to ask about their down payments as well: a larger amount got them better rates on the long term, without a doubt. Also, the source of this down payment matters: if it was also borrowed, it has a negative impact (for example, if a personal loan was used as funding source for a down payment on a mortgage).

Alternative Sources of Credit

Not everybody takes bad credit loans from banks. Some people prefer credit unions, which offer better deals to their members, since they are non-profit organizations. Others have opted to peer to peer lending, which presents higher risks, but often grants better terms to people in troubled situations, such as those with a history of bankruptcy. Some even use family loans, from their friends or relatives.

It’s always a good idea to ask the people you know where they got their credit, and maybe you can qualify for the same terms as well. Remember that there are a lot of factors to be considered, so don’t rush to join a credit union just because a friend of a friend told you so, but keep your options open and search for the best scenario for your case.

Better Negotiation Skills

When you first approach a bank, it may seem as if you have absolutely no choice but to comply with their terms and procedures. That’s not actually the case, and there is a lot of flexibility, once you know how to approach the issue. Sometimes people get good rates because they use the right credit counselor or the right lawyer to draft their papers, so ask for recommendations and see whether these services are suitable for you as well.