With all the downsides to the so-called credit crunch, there is one bright spot. If you need credit, you can now save big time. Interest rates are at all time low and are likely to stay there for the foreseeable future. Nobody should drown himself or herself in debt in a time when debt has swallowed so many. Nevertheless, for those able to pay, interest rate costs are as small as they are ever likely to be. Here are some effective strategies on how to save money on loans and credit.
One thing to be aware of is that it is possible to get into a lot of trouble by charging up your credit cards, which are still the most expensive form of debt. In addition, home equity loans as a substitute for financing purchases that otherwise would have been made by credit card are not as viable an option for many as they were over the past few years.
The big question then is whether to borrow, charge, or refinance and pay back with inflated dollars. On the other hand, do you simply exercise some ingenuity and do a little homework to find a better way. The best option should be no contest. You can take advantage of the fact that there are fewer buyers and borrowers to get a great deal on credit.
Suppose you are in the market for a new car. Sales are way down and you can use that to your advantage. Visit more than one dealer and look at those online. Use that background knowledge to bargain for a better deal. Dealers have often been willing to offer a better price if they get the financing.
In days past, that could cost you big time by paying their higher rate but that is no longer the case. The total cost of interest between, for example, 5.5% and 5.0% over four years is minimal. On a purchase of $30,000 it amounts to about $335, or less than $7 dollars per month. You can use that information to bargain for a lower price. The dealer has several ways to make up the difference on his end and still come out well. Moreover, they are desperate to move inventory these days so it is effectively a buyers market where the customer can virtually dictate the terms.
Similar ideas apply for those who are shopping for a house. It is true that loan criteria have tightened up but qualified buyers still find it easy to get a loan. It is in fact easier since so many other folks have gotten into trouble by taking on more debt than they could service. That puts you in a good bargaining position.
Unlike an auto loan, here a difference of a half-point (usually less) will amount to big savings. Over the average thirty-year life of a home loan, and on an amount of $300,000, the difference in this case is about $33,500 total and $100 per month. In addition, many other costs like insurance and more are keyed off the interest rate. It pays to bargain and the banks are hungry for new business from credit-worthy customers.
The key to getting big savings on credit is delayed gratification. If you are willing to walk away, or hold out for a better deal, which will surely be just around the next corner, you can save a lot of money on loans and credit today.