I've processed around 2,400 loan applications in my career. Maybe more. I stopped counting after a while.
That's 2,400 financial lives. 2,400 stories. Some happy. Some sad. Some that still keep me up at night.
Let me tell you what I've learned.
1. Most people don't shop around. Around 65% of my bank's customers took the first offer we gave them. They didn't check credit unions. They didn't compare online lenders. They just signed. Those people overpaid by an average of around $1,200 over the life of their loan. Don't be those people.
2. The monthly payment is a trap. I've already written about this, but it bears repeating. Banks know you're tired. They know you just want the number to be smaller. So they stretch the term. You pay less now and way more later. Always ask for the total cost.
3. Your credit score matters more than you think. A 50-point difference can cost you thousands. I've seen people with 680 scores get 12% APR while their friend with 740 got 8%. That's real money. Check your credit score before you apply. If it's low, wait a few months and improve it. It's worth the wait.
4. Origination fees are negotiable. Most people don't know this. I was a loan officer. We had wiggle room on fees. If you ask, sometimes they'll reduce or waive them. I'm not saying it always works. But I've seen it work around 30% of the time. Ask anyway.
5. Prepayment penalties are evil. I've already ranted about this. I'll say it again: if a loan has a prepayment penalty, think twice. There are plenty of lenders who don't have them.
6. Read the fine print. I know, I know. It's boring. It's long. But that's where they hide the bad stuff. Late fees. Default interest rates. Mandatory arbitration clauses. I once saw a loan that doubled the interest rate if you were late by 10 days. The borrower didn't read it. He was late once. His rate went from 9% to 18%. He called me furious. I didn't know what to tell him. He signed it.
7. Debt consolidation works if you change your habits. I've seen people consolidate credit cards, pay off the loan, then run the cards back up. They end up with twice the debt. Consolidation is a tool. It's not a magic wand. Fix the spending first.
8. Don't borrow more than you need. It sounds obvious. But loan officers are trained to offer you the maximum. I used to do it. "You're approved for $50,000. Do you want the full amount?" Most people said yes. They ended up with a bigger loan, a bigger monthly payment, and a longer term. Borrow what you need, not what they'll give you.
9. Pay extra when you can. Even $20 a month on a $10,000 loan can cut months off your term and save you hundreds. I had a client who paid $50 extra on his car loan every month. He paid off a 60-month loan in 44 months and saved around $1,100 in interest. That's a weekend getaway. Or a new phone. Or a nice dinner. Small changes add up.
10. The best loan is the one you don't take. I'm serious. If you don't need to borrow, don't. I've talked more people out of loans than into them. Sometimes the best financial move is to wait, save, and pay cash. It's not exciting. But it's safe.
I will keep posting updates on this. Check back soon.
P.S. Cooper literally just farted again. I think he's mad I'm writing instead of petting him. Fine. I'll take him for a walk after this. But first, I'm going to proofread. There's probably a typo or two in here. That's okay. I'm not a bank. I don't need to be perfect.
James Whitmore