Navigating financial matters can be intimidating for many people. The jargon and the complexity of some financial issues such as interest rates, mortgages or even credit card penalties and charges can deter some from even trying to figure out what they are.
The problem obviously with this approach is that you do have to know what the rules are to be able to abide by them. If you are taking a credit card, applying for a mortgage or shopping for a personal loan, not exploring the differences in terms and rates could mean that you will be stuck with a bad deal.
And while trust is a good virtue, relying on bank representatives to offer you a full, fair picture of the pros and cons of what you’re getting is a little too idealistic. Bad intentions aside, no one really knows what you’re looking for more than you. With that in mind, it is important to understand as much information as possible about what you’re shopping for. This can take a few steps to accomplish.
Here are the steps that can help you head on the right path.
Know the keywords
When you’re shopping for a financial product, there are typically a few factors that you need to know. Yes, there will be pages and pages of fine print, but in most cases what really makes a difference is a few big factors. For example, in shopping for a personal loan, you will need to know the interest rate, additional charges, how the rate is calculated, your monthly payment, any penalties for early settlement, what happens in a case of default, and whether there is any mandatory insurance that you will have to buy.
If you compile a list of these big factors and compare what lenders offer you, you should be able to make an informed decision based on the best rates and terms. You also will be able to see the differences and inquire about their causes. For example, you may find that you get a higher rate if your loan is stretched on a longer repayment period. If it doesn’t make a huge difference to your finances, you may opt to select a shorter period.
Research and ask questions
Don’t take your knowledge for granted. Some common terms — like interest rates, overdraft charges, etc — may seem to be self-explanatory. But if you are not fully clear how they are calculated or what a reasonable rate or charge is for your product, do some research and ask questions online and in meeting with bank representatives. Only by doing so, you can make an informed decision.
Again, this research may sound intimidating initially. But there are plenty of websites that explain financial terms on very basic ways. Your research also can help you learn what you need to ask about in your meetings with bank reps. While many charges and fees may seem to be a standard policy, you may find that lenders compete on waiving these to attract new customers. If that is the case, your research can help you land a better deal that saves you money on the long run.
Get the right product
Not all financial products are created the same. Banks offer an array of credit cards for example to cater to their broad base of clients. While the bank staff will ask questions to try to understand your need and offer you the most suitable product, your active participation in this process can help you. For example, you may find that you’d rather use a credit card that has no annual fee, even if it comes with fewer perks and special offers. Or that you’d rather go with a personal loan that has a lower rate, even if you pay it on a shorter period of time.
Being able to understand the differences between various products and how they meet your requirements is essential in making the right decision. Taking this further, you may even be able to negotiate a better deal for yourself with a lender that allows for flexible rates and terms. It all begins, however, with you being confident in your knowledge and asking the right the questions.
The writer, a former Gulf News Business Features Editor, is a Seattle-based editor.
Factbox: Knowledge is power
— Don’t be intimidate by jargon and terms
— Research and ask questions
— Learn to compare and shop around
— Pick financial products that meet your requirements