It’s going to cost a lot. By a lot I mean more than usual. Your expectation will be that it will not cost a lot only to realize that the interest rate is high and the fees are ridiculous. You would find yourself in this situation if you needed money and the 11th hour was approaching with no money in sight. At the last moment, a lender comes along and provides you with the money without reviewing the mountain of paperwork you have and makes a decision to advance funds based entirely on their experience, knowledge and comfort with the security you are offering for the money. Who finds themselves in this situation? Many people do and here is what some of the reasons are.
1. Their transaction was not prepared and packaged properly which results in a bank or lender constantly needing to ask for more information
2. They didn’t appreciate how long a bank can take to get a deal done
3. The clock ran out of time
There are many other reasons why people will pay higher interest rates and fees for money (i.e. poor credit history) however many times these costs are unnecessary and can be avoided. Lenders need to be compensated for the risk they take and that risk is often reflected in the interest rate and fee they charge. Risk relates to the chance that a lender will lose their money if a borrower can’t repay it. They can lose money because the security they have is not as valuable as they need it to be OR they can lose money by missing out on other places to invest their money to earn a comparable return. In my experience, lenders who provide their money at higher than average interest rates and fees have many places to deploy their capital.
The easiest ways to avoid paying more than you need to are:
1. Get prepared and package your request so that a bank or lender has everything they need
2. Ask how long the approval and funding timeline will be so you can plan accordingly
3. Don’t let yourself run out of time (which means you run out of options)
Time is money. – BENJAMIN FRANKLIN
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