You have a mortgage loan and your interest rate is quite high for current market levels. For example, about 5-6%.
How does the average borrower think when deciding to reduce his interest rate on the loan?
I have signed a contract with the bank for a certain interest – so my interest should remain the same.
How does the average borrower do when he wants to re-negotiate his loan ?
He enters the bank branch – usually the closest to his home or workplace – and says, “I want you to cut your interest!” The credit inspector kindly informs him that he has no power to reduce interest. However, the client has the right to make a written request to change the terms of the loan to the bank’s bankruptcy, and the credit inspector will move it.
Submission of the application, the text of which in 90% of the case is a variation of the following: “I have credit in your bank at what interest. Please reduce my interest because at the moment the interest rates of the other banks are much lower than yours. “
And let’s not forget – in some banks you also pay a fee for your application to come in. There is a waiting – between a week and a month. There are also lucky ones who receive their request within a few days, but they are rather an exception.
And what is the answer you get from the bank?
If you have accidentally agreed to reduce your credit interest – the amount of the discount is usually not close to your wishes. And let’s not forget – you also have to pay a fee for the interest rate cut. Fees vary – between 0.2% and 2% on the remainder of the principal. One made the calculation and began to understand that reducing the interest rate on the loan could be quite expensive.
Where is our hero wrong?
At every step! Absolutely each.
Let’s take a closer look at his actions and distinguish the mistakes:
- First mistake – “The client enters the bank branch – usually the closest to his home or workplace.”
Huge mistake! And it is widely accepted. Somewhat provoked by the bank officials’ claim that customer credit can be served by each branch. This statement is true. But here’s an important detail. The customer does not want the most usual loan service. He struggles to change the credit parameters. And for a change that will be to the detriment of the bank!
What am I trying to tell you? I tell you that you need to find an employee interested in your credit. And if someone has already thought of corruption – you are far from the truth. You must enter your credit change request from the place you are assigned to. From the branch and the employee who will suffer negative if you lose as a customer. Sometimes it is infinitely difficult. But it is extremely important. Another problem arises – you know who you are assigned to, but you also know that employees there are extremely weak. In this and only in this case, you can afford the luxury of not getting your claim from your service branch. But – and this is extremely important – you need to find a strong enough employee from another branch to be able to defend your request.
- Second mistake – the client says, “I want you to reduce my interest!”.
Most customers think it suffices to express their desire to be satisfied. They, however, forget the existence of the credit agreement. And in this contract it is clearly stated that the bank has the right to change the interest, and the client – if he wants to change any condition on the loan – should pay for it. And only if the bank agrees with the requested change.
Many customers deliberately do not want to indicate the interest they want to achieve. Their reluctance is dictated by the fear that, if they indicate a certain level of interest rate, they miss the chance of the bank lowering their interest. One kind – not to “spend”. The truth is, the surest way to get nothing is to ask nothing specifically. And “I want you cut your interest rate” is the perfect sample of a request for a person who does not know what he wants.
- Third mistake – the text of the request “Please reduce my interest because at the moment the interest rates of the other banks are much lower than yours .”
A sense of justice plays no role in dealing with the bank. Even the interest rates on newly authorized loans to other banks have fallen to 3% – your creditor is not obliged to reduce your interest rate from the current 5% to 3% just because “that’s fair,” and you think.
Be sure not to make the mistakes we’ve reviewed and be sure you will have a much higher success rate when re-negotiating your credit terms .
In case you are not sure of your negotiating skills – take advantage of my free consultation .
But whatever you decide – the surest way banks will continue to rob you is to do nothing.