With all the downsides to the hard times there is one bright spot: if you need credit, you can now save big. Interest rates are at all-time low and are likely to stay there for quite a while. No one should drown themselves in debt in a time when the debt has swallowed so many. But for those able to pay, interest rate costs are as small as they’re ever likely to be.
Still, it’s possible to get into a lot of trouble by, for example, charging up those credit cards, which are still the most expensive form of debt. Also, 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.
So, what to do? Borrow, charge, or refinance and pay back with inflated dollars? Or, 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’re in the market for a new car. Sales are down and that helps you. Visit more than one dealer – and look at those online, too – then use that background to bargain for a better deal. Dealers have often been willing to offer a better price if they got the financing.
In days past, that could cost you big time by paying their higher rate. That’s 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. Plus, they’re desperate to move inventory these days.
Similar ideas apply for those who are shopping for a house. It’s true that loan criteria have tightened up. But qualified buyers still find it easy to get a loan – easier, in fact, since so many others 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 30-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. Also, 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’re willing to walkway, or hold out for a better deal (which will surely be just around the next corner), you can save a lot on credit today.