When you’re applying for a loan, credit card, mortgage or any other financial product with an interest rate involved, it’s important to understand how your APR (annual percentage rate) is calculated. Your APR represents the cost of borrowing money over a given period of time, so knowing this figure in advance gives you the ability to negotiate a lower rate if you find that the standard APR is costlier than what you’re willing to pay. In short – if you’ve been declined before because of bad credit, you should know that there are ways to negotiate your APR and get a better deal for yourself. This article will give some quick tips on how and when to negotiate your APR.
Know your APR
Your annual percentage rate (APR) is the cost of borrowing money over a given period of time. This rate represents both the interest rate and fees charged for borrowing money, so you can use it to calculate how much money you’ll end up paying back over time. This is particularly useful if you’re applying for a loan, credit card, mortgage or any other financial product with an interest rate involved. Be careful, though, because your APR isn’t always the same as your interest rate. Credit card companies, for instance, usually advertise their interest rate but don’t reveal their APR. The two figures are very different, so you should always make sure you know what your APR is.
Know the reasons behind your APR
While you should know the exact APR that your lender is offering you, it’s also important to know the reason behind this particular number. Is your APR high because you have a low credit score? Or is it because you’re applying for a riskier loan type, such as a high-APR credit card? Knowing the reason behind your APR can help you figure out what to do next. For example, if your APR is high because of your credit score, you might want to consider paying off some of your outstanding debts to boost your credit score before applying for a new loan. If your APR is high because you’re applying for a riskier loan type, you might want to try and negotiate a lower APR.
Finding the best APR for you
When it comes to negotiating your APR, it’s important to understand that all lenders have different policies. Some lenders don’t budge on their rates, while others are happy to negotiate rates depending on your individual circumstances. Finding the best APR for you is all about knowing how to approach lenders, and it can be done in a few different ways. - Research your options - The first step to getting a better APR is researching your options. Find out what lenders are offering, and determine how much you’re comfortable borrowing at what rate. - Ask around - Another great way to get a better APR is to ask around. If you know people who have recently applied for a loan or are likely to be borrowing soon, ask them what rates they were given by lenders. - Call your lenders - Once you have a good idea of what lenders are offering, call up the ones that you’re interested in doing business with. Tell them that you want their best rate, and see what they have to say. - Be prepared - Last but not least, it’s important to be prepared when trying to negotiate your APR. Make sure you know your credit score, the rate you’re currently being offered and how much you’re willing to borrow before you contact lenders.
Negotiating during application
One thing to keep in mind when negotiating your APR during application is that you might not get very far. Many lenders have strict terms and conditions, so if you’re applying for a loan, credit card, mortgage or any other financial product, you might find that you’re not able to negotiate your APR at all. It’s worth a shot, though, and you never know what might happen until you try. That being said, there are some situations where it’s easier to negotiate during application than others. If you’re applying for a smaller loan, such as a personal loan, you might have more luck negotiating your APR than if you were trying to get a mortgage.
Negotiation after applying
If you’ve already applied for a loan and are having a hard time getting approval, you can always try to negotiate your APR after the fact. It’s not a guarantee that your lender will budge, but if you’re able to offer a reasonable explanation as to why you’re applying after the fact, you might have a better chance of getting a better deal for yourself. Examples of things you can try include: - You have lower-than-average payment - If you can prove that you have lower-than-average monthly payments, such as a low car or mortgage payment, you might have a better chance of getting a better APR. - You have recently paid off a debt - If you’ve recently paid off a debt, such as a credit card, you can try and negotiate your APR by proving that you have more money available to put towards your loan. - You are a first-time borrower - If you’re a first-time borrower, a lender might be more willing to lower your APR just in case something goes wrong. - You have a cosigner - If you have a cosigner, you might have a better chance of getting a lower APR because your lender has more people to collect from if you don’t pay back the loan. - You have collateral to offer - Lenders like people who have collateral to offer, so if you have something of value that you can put up as collateral, you might be able to get a better deal. - You have a high credit score - If you have a high credit score, you might be able to negotiate a lower APR because your lender knows that you’re a low-risk borrower.
In summary, it’s important to know your APR because it gives you an idea of how much money you’ll end up paying back over time. When you’re applying for a loan, credit card, mortgage or any other financial product, you can try and negotiate your APR to get a better deal for yourself. There are many different ways to do this, and you can try negotiating during application or after you’ve applied for a loan. Remember, though, that not every lender will be willing to negotiate, so you’ll have to be prepared if you want to try.