Borrowers with a high credit score have a strategic advantage. This is because they can negotiate a better deal in terms of lower interest rates with a lender.
Let us suppose that 32-year-old finance professional Ajay Sharma has a high credit score of 750. Without a doubt, he can use his score to negotiate for lower interest rate with his bank. Conversely, if his credit score were in the range of 500-600, his bargaining power to negotiate would fall drastically.
These are some of the steps which Ajay can take to snatch a tempting deal with a lender at the time of seeking a loan.
Steps to negotiate a good deal with the lender:
Know your credit score: Prior to negotiating, it is vital to know your credit score. With a good credit score, you have leverage to bargain for a better deal.
Find out the current rates: It is vital to understand the current interest rates offered by various lenders for similar financial products. This will give him a fair idea for negotiation.
Highlight your creditworthiness: Emphasise your good credit history and score during negotiations. Lenders are more likely to offer favourable terms to borrowers with low credit risk.
Consider different lenders: Do not settle for the first offer you receive. Shop around and compare rates from different lenders. Use online comparison tools or consult with multiple financial institutions.
ALSO READ: How to ensure a good interest rate on your personal loan? Here are 3 primary ways
Discuss the rival offers: If you have received better offers from other lenders, you should let your current lender know. They may, afterwards, be willing to match or beat the competing offers to retain your business.
Be prepared to walk away: There could be a situation wherein regardless of best efforts, a lender may not change stance on interest rates. In such cases, one should be prepared to walk away and take your business elsewhere if better terms cannot be negotiated.
It is vital to remember that while a good credit score can improve your negotiating position, it’s not the only factor which lenders consider.
Frequently Asked Questions:
Apart from the credit score, what are the other factors that matter in negotiating a better deal with a lender?
There is a slew of factors which matter in getting a better deal with the lender. These include, but are not limited to, your income, debt-to-income ratio, employment history, and other financial factors also play a role in determining the interest rates you’re offered.
Should you keep checking your credit score from time to time?
Yes, it’s recommended to keep track of your credit score regularly to stay informed about your creditworthiness.
What is a hard inquiry?
When you apply for a debt consolidation loan, the lender may perform an inquiry on your credit report known as hard inquiry.
Why should you check your credit report?
Monitoring your credit score regularly helps you stay informed about your financial standing and any changes that may impact your ability to borrow money or access financial products.
Can there be mistakes in credit reports?
It is not uncommon to spot mistakes on credit reports. So, regularly checking your credit score allows you to spot any errors, such as inaccuracies in personal information or incorrect reporting of accounts or payments.
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Published: 17 Mar 2024, 10:52 AM IST