GET THE BEST DEAL FROM YOUR BANK
Customers should not be afraid to negotiate interest rates when they are taking out loans. It doesn't matter if it is to re-structure existing loans or to take out new ones. Too often, customers are so happy to have found a solution that they accept whatever interest rate is going. Banks are more focused on margins and have moved to pricing loans based on the cost of funds of a mix of one, three and six-month money. Customers who maintian a good relationship with their bank are in a stronger position to negotiate the best rates.
So what interest rates can you expect to negotiate? Find out the current Euribor rate and add a bank margin of 2 to 4%. Anything over this is bad value. Overdraft rates
Overdraft rates are normally (but not always) higher due to the additional work and transactions involved. The margin will be 4.5% to 5% over the Euribor rate. Again you could pay a lot higher. In many cases. higher rates are a reflection of badly managed overdrafts or not negotiating the interest rates down.
Watch surcharges
Surcharges are other areas that can cost customers dearly if they breach their overdraft limit. Customers suffer a fee for breaching their overdraft but, more costly, is the surcharge that can be imposed. This surcharge can range from 6% to 12%. It is levied on top of the overdraft interest rate on the amount of money withdrawn over your limit.
For example, take a current account where the overdraft is €10,000 at 6%. If you exceed the limit by €5,000, you will be charged an interest rate of anywhere from 11% to 18% on this €5,000. This charge is penal.
Bank charges
Charges are levied on every transaction that is carried out at the bank. Are they negotiable? Yes. Banks have negotiated on charges in the past and have given a 50% reduction or free banking for a period.
There is scope to negotiate charges down and could mean up to €200 to €500 a year for some customers, depending on the number of transactions.
Key Points
- Know the rates on offer
- Identify the costs of money to the bank
- Watch surcharges
- Negotiate bank charges.