As a consumer in today's borrowing environment, we have certain expectations when it comes to interest rates, for example: 2.9% car financing - 4% mortgage rates - 0% introductory credit card offers. Every borrower looks for the best rate. But with most financing, you need to consider more than just the rate alone.
by Tony Dickinson, President - NCMIC Finance Corporation in Get Financing on Wednesday, February 08, 2017
When we hear a rate quote for a business equipment loan that doesn’t jive with our expectations, the immediate reaction is “Whoa! That’s a high rate!” I’ve heard it more times than I can count. And it doesn’t surprise me when doctors call because they thought they received a great rate from another lender, but discovered they’re paying much more than they realize.
As consumers, we inherently trust that the “rate” we are quoted or see splashed on an advertisement is exactly what we’re going to receive. However, when it comes to business borrowing, what you see isn't always what you get!
Why Does It Cost More?
How might a 7.5% quote from a lender cost you MORE than a 10.5% contract? Sadly, the interest rate that was quoted may not be entirely accurate when you confirm the lender’s rate calculation.
Considering rate alone can be deceiving. Some lenders omit things from rate quotes to win your business. Quotes may not consider down payments, end-of-term buyouts or other required fees and payments. All of these items end up costing you money and therefore MUST BE considered.
Can You Qualify?
How might advertised rates be unrealistic? Many times the fine print of low rate finance offers will require you meet certain credit requirements to obtain the advertised rate.
If you fall below a desired credit range you may be charged a higher rate. Disclosures may also stipulate it is only for selected equipment or require a minimum financed amount. Before assuming that the rate you see is what you will get, ask the lender how you can qualify for the advertised rate and any exceptions.
Making the Best Choice
The best way to make an informed, apples-to-apples decision is to compare payment quotes and not rate.
Ask each lender you’re considering to provide you with a quote based on the same equipment cost and payment arrangements that include:
- Payment Term (number of monthly payments)
- Monthly Payment Amount
- Advance Payments and/or Down Payment Amount
- Contract or Closing Fees
- Interim Rent Amount
- End-of-term Buy Out Amount
It All Adds Up
Total the amount of ALL payments (payment amount multiplied by the payment term), plus the other items listed above, and compare. Then ask yourself, “Which finance contract will cost me more?” When you boil it down to dollars spent, the “rate” alone may become far less relevant.
Making It Easier
How can you save time comparing and get fair and honest financing? Comparing financing can be confusing and most healthcare professionals would rather do what they do best – treat patients.
Call NCMIC’s Lease/Loan Comparison Hotline, and we’ll review any lease or loan contract you’re considering and compare it to our terms. We’ll point out the differences so you can make the choice that is right for you.
You can reach our team at 800-396-7157, ext. 6939. We'll be happy to help.