Category: Lending

How to Switch Lenders to get a Better Rate

If you have a loan, you may think that you are just stuck with that lender and the rate that you are on. However, this may not be the case and it is worth investigating to find out whether you can switch lenders as it could save you a lot of money.

Some loans such as student loans or payday loans cannot be moved. You will just have to stick with them until they are paid off. However some of the more long term loans such as personal loans or mortgages may be able to be switched.

With a personal loan, you will tend to have quite a few years to pay it off. This means that it can be worth switching if you find a better deal because you will save a significant amount of money in some cases. You will need to check though. Firstly find out whether the loan has a penalty for paying it off early as this could be quite high and cancel out any benefits of switching. Then see what is available and calculate whether it is worth changing, making sure you check for any admin fees charged by the new company. Then you will have to go about switching. This is not like switching a mortgage, which is easier and discussed later. You will have to apply for a new loan and if it is approved you will need to use it to pay off the old one. Obviously this takes a lot of discipline because you will need to make sure that you do use it to pay off the loan and not be tempted to spend it on something and get into more debt. As an alternative you could ask your current lender whether they have any better rate loans you could switch to.

With a mortgage there will be quite a few costs associated with changing lender. The new lender will want to check that the property is worth more than the value of the mortgage and therefore they may want a survey done and they may want to look at the documents associated with the property. They will be sure to charge an admin fee for this. You original lender may charge a fee for repaying the mortgage early as well. Although these fees could really add up, it could still be well worth switching. The difference in interest rate could be so significant that it is worth it. Do the maths and check what a difference it will make over the rest of the term of the mortgage. Of course, there is never a guarantee that the interest rates will stay as they are and it could be that more favourable rates appear elsewhere or the lender you choose puts there’s up. Think about how long you will have to be with the new lender to cover the costs of moving and then decide whether you are willing to take the risk of moving. It is not a significant period of time then it is probably worth it, but you may like to see a financial advisor to check if you are not confident in making this decision by yourself.

Another big way to save money on loans by switching lenders is to change the type of loan that you have. Some types of lending, such as payday loans and unauthorised overdrafts are much more expensive than other types such as personal loans. Therefore it is worth looking to see whether you can borrow money more cheaply and use that to pay off your more expensive loans – Emu Loans, a UK payday loan company is a good example of this. You need to start by finding out how much your current borrowing is costing you and then looking at the alternatives to see if they are cheaper. You may be paying fees and charges as well as interest so check that and see how it compares. Beware though as advertised rates are not always those offered to customers. So if you see a good loan rate, find out whether that rate would be available to you as often lenders will give a less favourable rate to those who have a lower credit rating. So make sure that you check this before you apply.

Switching to zero interest lending can be the best way to save money. You can do this with a zero interest credit card, for example, although there may be a fee if you transfer a balance over. However, it is worth being careful with these sorts of things as once the zero interest period is over, the interest can be extremely high. This will mean that if you have not managed to pay off the debt by then, you could end up with it growing very rapidly.

So there many options for you to save money on your loans and it is worth investigating them to find out whether you can save money as in some cases the savings can be quite significant.

How to Pick the Best Lender

If you are thinking of borrowing money then it is really important that you find a good lender. Most people will compare the products themselves and the prices and choose a loan which will be the best for them with regards to the cost and the terms. Although it is extremely sensible to do this, you should check out the lender before you sign anything as this could make a difference to your decision.

It is important to know whether you lender is likely to be helpful, treat you well, has a good reputation and provides good customer service. If you have any questions or queries once you take out the loan, you want to be confident that it will be easy to get in touch with them and that they will deal with you well. In order to find out there are a few things that you can do. It is good to take a look at some reviews of that lender online. Try to avoid looking at reviews on their own website but look at other sites to see what people are saying about them.

Try to read comments and find out what sorts of experiences people have had. Consider that there will always be some bad reviews, but if there are more bad than good, then you could have cause to worry. It is worth noting though that people are more likely to write a review if they feel really strongly about something and so only those that are really pleased or really annoyed are likely to write them. This means that reviewers may not represent a typical cross section of the lenders customers. However, this will be the case for all lenders and so if you compare them, then this should be fair.

Ask friends and family if they have had any experiences with that lender and whether they would recommend them or not. They may be able to tell you about things that they have personally experienced or things that friends and family may have told them about that lender and so it is worth finding out. You will also know that they will have no reason to be biased and have your best interest at heart.

It is wise to telephone the lender and talk to customer services. Ask them a few questions and out the loan so that you can find out how knowledgeable, friendly and helpful they are. Of course, they may not all be the same and so you may want to check by calling a few times and speaking to different people.

You may also be wise to try to find out how flexible the lender is. This means seeing if they will allow you to change you product if there is a better one available or if you need to miss a payment whether they will be understanding and allow this, or to reduce payments for a while if you are struggling to manage. Many lenders will allow this in exceptional circumstances so that you able to manage your finances and then get back on track when you are ready.

It can also be good to try to work out whether they are likely to put your interest rate up. Obviously this will only happen if you have a variable rate and most lenders may do this if the base rate is raised. However, it can be wise to see whether you can find some facts and figures to see how quickly the lender responds to market changes or whether they are prone to random increases in interest. Even if their starting rate is competitive, they may put the rates up once you have borrowed the money and so you want to protect against this if you can, by finding out more about the lender and using one that you trust not to do this to their customers.

You may feel that going with a lender that has a well-known brand name is important. In a way this can be good because they have a reputation as they are well known and should treat you well in order to keep that reputation. However, if they are big, they can afford a few complaints and so their reputation may not be so important to them compared with a small lender who needs all the business they can get and relies on good customer reviews to get new business.

This is a lot to think about, but when you are borrowing money it is a big decision that needs a lot of thought. You want to make sure that you are not only choosing the right product but have chosen the right lender as well. There are many things that you can do to find out more about lenders so that you can see whether you are making the right decision.