All Loans Are Not Created Equal
For some of us, the idea that we should “shop for a loan” seems a bit odd.
Aren’t all loans pretty much the same? If I have good credit with one lender, don’t I have good credit with them all? And isn’t the interest rate at my local bank pretty much what it would be anywhere else? Isn’t that stuff all indexed to some national something-or-other anyway? It’s not like my credit is SO impressive that lenders will fight over me. Why would I loan shop when really I’m just grateful for anyone who’ll offer me terms?
If that’s you, you’re half-right about some of it. If you have good credit, for example, that should help you no matter where you shop for a loan (just like poor credit will impact you everywhere as well). That doesn’t mean the impact will be the same from lender to lender, however. And yes, most interest rates companies set are indexed to a “national something-or-other.” That doesn’t mean they’re all the same, or that lenders don’t have great discretion what terms they actually offer you. As to lenders fighting over you, we doubt they’ll come to blows or pace off to the count of ten. But more of them want your business than you might think. Even if your credit score is average or below average, online loan companies want the chance to win your business. They don’t make money if they don’t make loans. You’re a potential customer. Give yourself some credit, and maybe they will, too.
Most importantly, the impact of a little personal loan shopping when you’re considering doing some debt consolidation, or business loan shopping when you’re working out how to finance a business, or even mortgage loan shopping when you’ve found “the” home for yourself and your family, is cumulative. In other words, the positive impact of taking the time to shop for a loan instead of accepting the first thing that comes along gets bigger and better each time you move another step forward.
Let’s look at an example.
Keeping Your Goals In Sight
Let’s say you have several credit cards which you just can’t seem to get under control. You keep paying on them every month, but the balances never seem to get any lower. You decide to take out a personal loan for credit card debt, which reduces multiple monthly payments you can barely afford to one monthly payment you can easily budget for. You know keeping unused cards open helps your credit, so you keep one in your wallet for emergencies and lock the other two in the family safe where you can get to them if necessary, but won’t be tempted to use them casually.
This type of basic unsecured consumer loan is essentially a debt consolidation loan (referring to the debt from your various credit cards). Now that they’re paid off, your credit score goes up. As you repay the loan over time, you’re building a stronger credit history. Once you’ve paid it in full, your credit goes up even more. Next you decide to replace your three high interest cards with one low-interest simple credit card – no rewards and nothing fancy. You use an online credit card comparison chart you found here on Goalry and apply for the card that best suits your lifestyle and goals. Because your credit has improved from what it was before that debt consolidation loan, you’re offered even better terms than you expected. (You can use it right now)
With your lower interest credit card, used more strategically, you have even more disposable income each month. That means more flexibility with your time and your resources – you can fix up the house, take the family to do more things, or apply the extra towards other debt reduction. Plus, your credit score is still rising slowly (but surely) as you make better choices. A few years later, your daughter is about to turn 16. You want to buy her a sensible used car. With your improved credit status and the time you’ve spent educating yourself about personal finance, you do a little auto loan shopping and find a great deal on a reliable like-new vehicle and use online auto financing. You’re now paying hundreds less a year than you would have for the same car five or six years before, and continuing to improve your credit – meaning next time it’s even better rates, more savings, more options, etc.
The Journey Of A Thousand Dollars…
It’s one of the harsh realities of modern American capitalism. The better you handle your debt, the less you pay for credit and the more options you have when you choose to finance. The more debt you incur and the less able you are to manage it, the more each dollar of debt costs you. That’s one of the many reasons debt can so quickly become like quicksand, pulling us further an further behind until we’re convinced there’s nothing we can do. When we push the other direction, however, the process reverses itself over time.
You started your credit journey (in our example above) barely able to keep up with minimum monthly payments. But you did a little strategic rate shopping on simple installment loans, and slowly got those obligations under control – simply by restructuring them and educating yourself. You’ve heard that the journey of a thousand miles begins with a single step? That’s true financially as well. The journey of a thousand dollars begins with a single interest point, or saving a single dollar, or eliminating a single unproductive debt. Or joining Loanry and getting the member key for accessing the entire Goal Mall.
Before that, it might begin with a single lunch break devoted to reading up on the world of auto finance or typical small business loan terms. It might even mean spending some time with our informational blogs about where to get a loan when you have no credit. Knowledge is power, and financial knowledge is financial power – or ate least financial potential. It won’t always be easy, but it’s almost always possible. We may not reach our goals tomorrow, but we can be closer to them than we are right now. Very often, reaching those long-term goals starts with making more strategic choices about if and when we borrow, and how we borrow when we do.
Credit Cards
Many experts will tell you to avoid credit card debt altogether. That’s not a bad idea if you can do it. In a perfect world, we’d save up for major purchases and only finance things like our homes or maybe a vehicle here and there. At the same time, credit cards – when used responsibly – offer us flexibility we don’t always have with cash. If you’re going to reserve a hotel room, purchase an airline ticket over the phone, or order something online for someone’s birthday or other holiday, you’re probably going to need a credit card.
Keep in mind, however, that credit cards are literally designed to keep you in debt forever. Credit card companies love to approve us for amounts quite a bit higher than we should probably be spending, then bill us for “minimum payments due” each month. The problem is that those minimum payments are calculated to keep you paying almost indefinitely. If you don’t pay quite a bit more than the minimum, you’ll pay for the same purchases over and over and over each month, and interest on the interest on the interest of those purchases.
It’s no coincidence that we started our example above with our protagonist taking out a personal loan for credit card debt. If you’re trying to take more effective control of your finances, that’s usually a great place to start. In our example, our pilgrim took the time to weigh his options and consulted an online credit card comparison chart of the sort you can find on Loanry. They eventually settled on a single, simple credit card with no frills and a lower interest rate. We can even assume he didn’t use it lightly, but only for online purchases or reservations, and paid it off quickly each time.
We’re going to suggest, however, that our financial hero could have actually done one step better. That he could have done what we suggest you do when you’re considering a new credit card (or a replacement for a higher interest card you currently use). It doesn’t start with the online application or even the credit card comparison chart. It starts by educating yourself about different types of cards, different options and features, and the advantages and disadvantages of each. Given the power and potential danger of credit card usage, does it seem so unreasonable to take an hour or two over the course of a few weeks to read up on what’s available?
These aren’t your parents’ credit cards anymore. There are so many fancy sounding offers and points and miles and special this and bonus that. It can be overwhelming. Any website to compare credit cards should also be a website to educate about credit cards. Otherwise, how can we be sure what we’re comparing?
Vehicle Financing
Wouldn’t it be nice if you could always trust dealer financing to be your best option? It would be almost as helpful if we could assure you that dealer financing is never the best option. Neither of those are true, however. There are advantages and disadvantages to new car loans, and pros and cons to dealer financing or choosing to finance a used car online. That’s why the most important thing you can do before choosing a vehicle is to take a little time to browse the Loanry blogs and get a lay of the land.
You’ve probably sought or given advice on how to shop for a vehicle – let us help you with how to shop for a car loan. You might be surprised what’s out there - options for bad credit auto financing, flexible terms, you can even refinance your car loan in many situations. It’s not just about rate shopping – it’s about understanding how vehicle loans work and how they fit into your larger financial goals.
Of course we’ll help you shop for a loan – but we want you to be happy with your decision six months from now and six years from now as well!
Mortgage Loan Shopping
We talk a lot about the importance of making regular, small decisions that move us towards our goals. There are situations, however, in which one BIG decision can have substantial impact over a very long period of time. A home purchase loan is one of those times.
For most of us, buying a house is the single greatest investment and financial commitment we’ll make in our lives. Finding the right house matters, but so does negotiating the right price and securing the best terms. Just because you can get approved for a particular amount doesn’t mean it’s a good idea to spend that amount. Make sure your budget shows a realistic path forward for making those mortgage payments on time every month.
Make sure you know going in the difference between a fixed rate mortgage and an adjustable rate mortgage – as well as the pros and cons of each. The Loanry blogs have plenty of mortgage tips and break down the terminology of the industry into plain, simple English for you. Many homebuyers don’t even realize they have options where to shop for a mortgage. Your realtor may have recommendations, and your local bank or credit union no doubt has an offer or two. But don’t commit until you’ve also explored online options and compared rates.
When you’re mortgage loan shopping, keep in mind that even a half-a-percentage-point can mean thousands of dollars each year. That’s worth taking an extra 24 hours to explore, don’t you think?
Small Business Loan Shopping
Entrepreneurs don’t like to focus on the realities of small business finance. It’s not why most of us go into business for ourselves or the part we enjoy doing. Sure, making money is nice – but paying employees or contractors, covering rent or office expenses, juggling inventory, maintaining equipment… that part isn’t our passion. We’d like to get it taken care of so we can focus on the parts we love!
Access to financing is critical to small business survival, however. One of the primary reasons good, solid businesses fail is that they can’t secure flexible funds when necessary. More than any other type of financing, when you business loan shop you have to think not just about rates or dollar amounts but terms and relationships and long-term planning. Whether you’re expanding or managing invoices, we can help break down your small business finance options.
One of our favorite options is the online business line of credit – once approved, you only use what you need and only pay interest on what you’ve actually used. Because it’s online, you have access anytime, anywhere – so you can spend more time taking care of business and less time worried about business loan shopping or how to finance a business.
Student Loan Shopping
If you have a higher education loan, it won’t come as news to you that student loans are tricky. Depending on where and how you borrow the money, the terms can be very generous or very demanding. Recently it’s even turned out they can simply change without warning. No student loan forgiveness for you, sorry – we changed our minds! Average college debt is such that it’s a regular talking point during political campaigns. For most of us, however, it’s much more personal than that – what about MY student loan? How does this factor into my financial goals?
Loanry devotes several of our blogs to unraveling the mess and mystery of student loans. If you’re considering going back to school, we can connect you to lenders who can give you more options than you might expect. You should always start with traditional student loan shopping. We have an amazing online student loan locator that can help you get started. At the same time, you might be surprised at the terms possible with personal loans for excellent credit or signature loans online for even average credit. We can also talk about the pros and cons of refinancing your student debt.
Personal Loan Shopping
Your needs don’t always have to fit convenient categories, of course. There are all sorts of reasons to shop for a loan. There are also an almost endless variety of options you’ll discover when you start to loan shop. Online loan companies – because they have national reach and usually much lower overhead – offer surprisingly competitive rates and other terms. It’s quite difficult in the 21st century to beat many of them when it comes to personal cash loans (in which the full amount is often deposited in your account within 24 hours) or longer term installment loans for major events or purchases.
We’re happy to help you shop personal loans. We have that database of reputable lenders we mentioned above, many of whom specialize in situations just like yours. Whether it’s a personal loan for bad credit, debt consolidation, a vacation, a wedding, home improvement – we’ll offer you information and options as well as connections to lenders. We’re glad you’re personal loan shopping – it means you’re paying attention and not willing to settle for the first available offer. When you shop for a loan, however, we hope you’re always looking towards the next need, and the next, as well.
We’ll also keep you posted on some excited new technology we’ll be unveiling soon which will make it even easier for you to track your spending, your savings, and – of course – your loans, balances, and upcoming payments. If you choose to start with a member key today, this will give you instant identification across the Goalry family, making it easier for your to use many of our online tools or get connected to our partner institutions whenever you choose.
It may not always be easy to navigate your personal or small business finances, but it doesn’t have to be as hard as it sometimes seems. And you don’t have to do it alone.