Shop For Your Best Loan

Aug 13, 2024

Are you a savvy buyer who comparison shops to find the lowest price? Do you do the same when you’re preparing to take out a loan?

The best way to save on interest is to make sure you’re getting the best deal when you take out your loan in the first place. If your cash needs aren’t urgent, take a few weeks to do your research and follow the tips below.

Keep an Eye on Trends

No, we don’t mean fashion trends–we’re talking rate trends! Banks and credit unions typically base their lending rates off the U.S. Prime Rate published in The Wall Street Journal.

While the exact rate will depend on your credit score, collateral and terms, the prime rate can provide a good baseline for what to expect. When the prime rate goes up or down, you can expect rates in general to follow the trend – including for existing variable-rate loans, such as an ARM or credit card.

As of July 2024, the prime rate has been at 8.50% for about a year, but in less stable times the rate may change every few months. Look up the historical trends and current predictions to gauge what type of loan might be best, and whether you should act now or wait for rates to change.

Go Rate Shopping

Rate shopping is exactly what it sounds like – you submit loan applications to multiple lenders and then compare the rates and other loan details that they offer.

Note: You may know that loan applications result in a hard inquiry on your credit report, which may make your score dip. A hard inquiry is when a lender requests to look over your credit file in response to an application. However, multiple applications for the same type of loan within a short period of time are treated as one hard inquiry. Aim to submit all your applications within a 14-day period to avoid multiple hard inquiries. Just keep in mind that this is true only for fixed-rate installment loans, such as an auto loan. Multiple applications for credit cards are treated as separate hard inquiries.

Rate shopping is extremely beneficial because you’ll get a firm offer that won’t change, and you can easily compare all the details, including fees and benefits.

Get Prequalified for Credit Cards

Applying for multiple credit cards is treated differently than applying for installment loans. If you apply for multiple credit cards, you’ll have multiple hard inquiries on your credit report, which may lower your credit score. To avoid this, you can get prequalified instead of applying.

Prequalification is not a firm offer, so you only get an estimate of the rate and fees you’ll pay. But it only counts as a soft inquiry on your credit report, so it will not affect your credit score. A soft inquiry is when you authorize someone to check your credit report, but you didn’t send in a loan application yet.

Whether you’re shopping for a credit card or an installment loan, getting prequalified is a great first step – especially if you’re not ready to apply yet. It will give you a pretty good idea of the rate and terms you might get.

Rate Isn’t Everything

Of course, rates and fees aren’t the only factors to consider when shopping for a loan. Different lenders will have different terms, different financing limits and different extra benefits. You may find it’s worth it to accept a slightly higher interest rate for a lender’s unique advantages.

At Honda FCU, we’re always ready to help. You can view our rates and apply online for the loan you need. We’re here for you!

References:

https://www.experian.com/blogs/ask-experian/how-does-rate-shopping-affect-credit-score/

https://www.experian.com/blogs/ask-experian/what-is-rate-shopping/

https://www.wsj.com/market-data/bonds/moneyrates