Pricing, Including Risk-based Pricing & Relationship Based Pricing
Pricing policy varies a great deal. While you probably can't influence the pricing policy of a given financial institution, you can:
- Shop around
- Ask for a better rate - some financial institutions will respond to this, some won't
- Price match - many financial institutions will match a rate for a current customer
Pricing is often done in one of these ways. Follow the internal links for more details:
- Everyone pays the same rate. This is an older approach, and most financial institutions no longer use this approach because it causes low risk customers to pay a higher than market rate, while high risk customers get a better rate than they might otherwise get, causing the financial institution to get a lower rate of return on the loan than the risk might imply.
- Risk-based pricing. With this approach, pricing is based on various risk factors including loan to value, credit score, loan term (expected length, usually in months)
- Relationship based pricing is often used to offer a slightly better rate to customers that have a substantial business relationship with the financial institution. This is often a price improvement offered on top of the otherwise computed rate.
Read more about this topic: Loan Origination
Famous quotes containing the words including, relationship and/or based:
“And so the reliance on Property, including the reliance on governments which protect it, is the want of self-reliance.”
—Ralph Waldo Emerson (1803–1882)
“It is possible to make friends with our children—but probably not while they are children.... Friendship is a relationship of mutual dependence-interdependence. A family is a relationship in which some of the participants are dependent on others. It is the job of parents to provide for their children. It is not appropriate for adults to enter into parenthood recognizing they have made a decision to accept dependents and then try to pretend that their children are not dependent on them.”
—Donald C. Medeiros (20th century)
“The time must come, my friend ... when brutality and the lust for power must perish by its own sword.... For when that day comes, the world must begin to look for a new life, and it is our hope that they may find it here. For here we shall be, with their books, and their music, and a way of life based on one simple rule: Be kind.”
—Robert Riskin (1897–1955)