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Ask Allen: How do I get the best interest rate possible?

How do I negotiate a better interest rate?

--Trying to save on Expenses

From your question, I am assuming that you presently have one or more substantial long term loans. If you are considering a new loan rather than paying off and re-financing an existing loan, most of the below suggestions will still apply:

  1. Particularly in a refinancing scenario, obtain a printed payment history on your existing loan. Although lenders will be accessing credit reports, having a written history of the present loan will be impressive to possible new lenders in your initial personal meeting with them.

  2. Develop a relationship with possible new lenders. If a new lender is considered, I suggest: As “Location, Location, Location” is of utmost importance to fast food chains, car dealerships, and branch banks, “Communication, Communication, Communication” is analogous as it pertains to banking relationships. The difference, however, is that you must communicate with a bank in the “Language of Business,” as addressed in our seminars. In this case, you should add communication of the goals that you are seeking.Prepare well for your meetings, both initial and ongoing. That preparation involves (a) your having well-defined goals and (b) the ability to demonstrate how you are progressing in attaining those goals. I would approach the matter along these lines: (a) Tell the loan officer about yourself, your family, education, etc., what you ultimately want to achieve and how you plan to go about accomplishing those achievements. This includes educating your banker about your industry, your competition, and the metrics whereby people in your industry measure successful operations. Then,(b) Show your banker your financial situation and operational history; this involves the language of business. Show him or her your Balance Sheets, Income Statements, tax returns, and possibly Cash Flow Statements, and other ancillary information such as % of delinquent accounts, inventory turnover levels, employee productivity figures, etc.

  3. Consider additional enticements that you might bring to the table; e.g. opening new account(s) with the lender (new or existing), moving retirement programs to custody of the lender, personal business relationships including trusts, children’s accounts, etc. These arrangements are far too numerous to list in this venue. Also, the amount of the loan is material; there is a great deal of difference in negotiating an interest rate on relationships involving millions, hundreds of thousands, or thousands; even though rate negotiation occurs at all levels.

  4. Unless it is your stated policy that you will “shop” rates periodically (in which event you certainly should advise the lender accordingly), you should make it clear that you are not simply “rate shopping” to always do business with the lender offering the lowest rate. In my experience, it is best to deal in relationships, not simply single instance occurrences. Any relationship must be based on trust and the realization that each party must find the ongoing relationship mutually beneficial.

  5. Last, but not least, tell the prospective new lender why you wish to leave the previous banking relationship. Details to reveal are as you choose, but it will be helpful to the prospective new lender to have an idea as to your motives.

Hope this helps.

Please see “” for seminar information which can provide additional information on this topic.

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