If you could sit down with a few bankers and ask them to honestly tell you how to get the best interest rate possible, what would they say? You dont have to wonder any more. We have several ex-bankers on staff who have spilled the beans on how to get the lowest interest rates. These tips work for loans, lines of credit and mortgages.
Banks and credit unions are in the business of lending money. They want to lend you money as long as they think that you are worth the risk. Bankers know what a good risk looks like when they see one because they have some very strict lending guidelines that they have learned to follow. If you fall neatly within a banks lending guidelines, then they would love to have you as a client. So how do you look like one of their ideal clients? Here is what you need to do:
Have a stable job with an income that can support the debt you are applying for.
Look like a stable person. Try to stay with each of your employers for at least two years. Also try to live at the same home for at least two years before moving.
Make sure you have business potential from your banks perspective. If it looks like your income will grow in the future, communicate that to your banker. If you will likely move into a bigger home or buy a new car in the future, discuss these possibilities with your banker as well. All of these things usually mean future business to a banker, and they make you look like a client with good future potential.
Be open to a long term relationship with your bank if they are good to you.
Make sure you pay your bills and maintain good credit.
Banks and credit unions cant help you unless you have satisfactory credit. So you need to make sure that yours is decent (click here to find out how to get your credit score). There are many simple things you can do to refine your credit report:
Do you have any idea of what is on your credit bureau (also called a credit report)? Many people dont. Some people think they have good credit, but they have nothing on their credit report because all of their debts only report on their spouses credit bureau. Make sure that your credit report looks right and is accurate.Click here to find out how to get a copy of your credit report.
One studyreported that up to 25% of credit reports contain errors that could hinder someones ability to obtain credit. Whether or not the claims of this study are true is debatable, however, many people find things that they can fix like old credit accounts that they thought they closed that are still reporting as open. If you find an error on your credit report, contact the financial institution that is incorrectly reporting the information orcontact the credit bureau agencythat provided the credit report.
If you have any negative information on your credit report, try to fix it. The only things you can quickly fix are unpaid collections reporting under the public records section of your credit bureau. You can pay these and then request that they be removed. If late payments or abankruptcy is reporting on your credit report, the best thing you can do is demonstrate responsible use of credit since that time and wait for the negative information to go away (it takes years, but this is the only way you can fix this kind of negative information).
Bankers prefer to deal with people who pay their bills on time. They dont want to have to call you to find out when you are going to make your overdue payment. Make sure you pay all of your debts as agreed. If you dont, bankers will be afraid to deal with you. If you did fall behind on some payments for a while, make sure you have a really good reason that you can substantiate.
Bankers dont like it when they pull a copy of your credit bureau and find that you have applied to a bunch of other banks before you came to speak to them. This tells them that they are possibly wasting their time with you because you are either rate shopping (and doing a bad job of itsee point number 5 below) or there is some reason why everyone else is declining your credit application. Do your rate shopping without filling out credit applications and if two banks or credit unions decline your application, dont keep applying. Seek help from a Credit Counsellor oraddress your issue some other way.
3. Give your banker reason to give you his best rate
Banks and credit unions are in business to make money. They are not going to give everyone their best interest rates without a good reason or their shareholders will get mad at them. As far as your banker is concerned, if he gives you his best rate, he needs to be able to explain to his boss why he did this. So you need to give him some good reasons to give you a good deal (saying that you will go somewhere else wont convince a banker unless you are a very valuable client). Here is a list of the kinds of reasons that will help you with bankers:
If you are serious about moving more of your banking to your bankers bank or credit union, this means that your future business could justify him giving you a discount today. Bankers are interested in getting all of your borrowing, investing, deposit and insurance business that they can. Mortgages of course are the most important, but other stuff like your chequing account and your RRSP are good too.
Many banks and credit unions base their loan and line of credit interest rates on a clients credit score. If you have a really good credit score, you should be able to get a really good interest rate.
If you have a lot of family that deals with your branchespecially if they have mortgages, large deposits or investmentsthen your branch wouldnt want to tick you off and have you speak badly about them to your relatives. The same is true if you are part of a company that is a valued client of your branch. They want to keep all of their valued corporate clients and their employees happy.
If you are a center of influence in your community or your industry, this may also give you clout with your branch. If you are a builder, real estate agent, broker, business person or other person of influence. A branch may want to develop a good relationship with you in the hope that you will send them referrals. If you have referred a lot of people to your branch and they know it, they may be willing to extend themselves for you when you need some help.
If you have been with a bank or credit union for a long time, they recognize and value that. There are many factors that are technically more important than your loyalty; however, your loyalty to them will usually help you get a slightly better deal than someone who just walks in off the street.
With all of these reasons to get a better interest rate, they mean nothing if your banker doesnt know these things about you. If your banker doesnt know your history with his bank or credit union, it is perfectly fine to let him know what a good client you have been over the years and how you appreciate the fact that they have been good to you (make sure that you only speak the truth. Your banker can quickly verify your story if he looks at your file or asks others who have dealt with you before).
Good bankers can be worth their weight in gold (well almost). If you happen to get a fantastic banker, try to stay with them for as long as you can. A good banker will take good care of you and make sure that you always get the best deal, or they will at least tell you how you can get the best deal if you chose to take them up on their offer. Usually you have to move all of your banking to one bank or credit union for your banker to be able to do their very best for you, but it can definitely be worth it. If you know that you have an awesome banker who always does what is best for you, then dont be too quick to leave them if someone can offer you a rate that is a little more attractive.
Every bank sets limits on what discounts their branches can offer. These limits change from time to time. So if your banker cannot get you the best rate right now, it may be because they are not allowed to. If you have a terrific banker, stay with them and they will most likely make it worth your while in the long run. Banking is all about relationships. Establish good relationships and dont burn your bridges. You may need those bridges again some day.
Feel free to check out different banks and credit unions to see what kind of interest rates they offer. You can find out interest rates by visiting a branch in person or by calling on the phone. When you contact a bank or credit union, tell them you are thinking of applying for a loan or mortgage and ask to speak with a loans officer. Tell them that you are looking for the best rate and ask them what their best rate is. They might say that getting the best rate depends on a number of things. That is fine. Ask them what those things are, and if they are evasive, ask the question this way, If I was one of your best clients, what interest rate would you give me? Once you know what the best rate is and what it takes to qualify for the best rate, you can then have a discussion about whether or not youqualify for the loan or mortgage best rate. If you dont qualify today, then maybe you can work towards it.
If you are shopping for a mortgage, the fastest way to shop for interest rates is to call up a few mortgage brokers and ask them. Not all mortgage brokers are able to deal with every bank and not every bank is willing to give the best rate in town all of the time. So this is why it is important to contact several mortgage brokers if you want to find out what the best rate is. It may be that the first person you speak with can provide you with all of the information that you need, but then again, that first person may be new to the industry or may not be able to offer you the absolute best rate. Check around if you dont want to be sorry.
Once you know what the best rate in town is, you can then go back to your favorite bank or credit union and see if they can offer you that rate.
When you go rate shopping, dont fill out credit applications, it will waste your time and the loan officers time. It can also impact your credit score if you apply at too many places over more than a three day period. If you dont know what you are doing and a loan officer or mortgage broker spends a lot of time with you and really helps you out, it would probably be a good idea to reward them with your business as long as they can offer you a competitive interest rate.
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