If you have been considering taking out a personal loan, then this may be the best time to do it. A number of factors have recently contributed to a rise in competition between loan providers, leading to a shift in power towards the consumer.
Stories on lowered consumer spending, further global economic turmoil, and a post-GFC economic slump have been plastered over newspapers, television and the internet for months. The media seems to enjoy giving the impression that economic Armageddon could be just around the corner. Knock-on effects from this media circus included borrowers finding it much more difficult to get loans approved, as lenders shrunk back from the economic insecurity.
At the beginning of November, the Reserve Bank provided potential borrowers with new hope. With its Melbourne Cup Day announcement to cut interest rates for the first time in almost three years, the Reserve Bank gave an official rate cut of 0.25 per cent, bringing interest rates down to an 18 month low of 4.50 per cent. While many lenders were quick to pass these savings on to their customers, the Treasurer Wayne Swan publicly slated those that didn't.
The rate cut has also sparked competition between a number of banks and other loan providers. Many lenders are now vying to attract new customers and to retain old ones, leaving consumers in the position where they are able to negotiate. To attract custom, lenders may be willing to match competitors prices, or even beat them. Potential borrowers should be aware of the value of shopping around to ensure they get the best deal possible.
Lenders are also offering a range of other incentives to attract customers, such as waiving or significantly reducing fees. Different providers will offer different benefits, so borrowers should investigate which works best for them in the long-term.
While many Australians continue to worry about the future of the global economy, the current economic conditions seem to have produced at least a few benefits for consumers. Competition between lenders offering slashed rates and other incentives on loans may mean that this could indeed be the best time to borrow.
