Bank loyalty…a one-way street?

On a daily basis we meet clients who say “I’ve been with my bank for a long time, I do all my banking with them and I’ve never missed a repayment. My bank will look after me because I am a loyal customer”

Unfortunately, like in all business not just banking, it can often be those long standing customers that get ‘lost in the system’ all the while the business is focussed on attracting new customers.

So how do you ensure your bank is staying loyal to you if you are going to remain loyal to them?

The short answer is to undertake regular check-ups on the health of your loans and don’t become complacent about your banking.

“Easier said than done” I hear you say! We agree. Banking is a very complex business. We even get bamboozled from time to time and we work in the industry every day!

If you are inclined to have a go yourself here are three helpful tips to take into account when assessing whether to challenge your bank loyalty and either renegotiate with your current bank or refinance to another.

1. Consider your current ‘loan to valuation ratio’ (LVR). To do this you simply add up the total outstanding balances on all your loans and divide that figure by the current value of the properties that the bank holds a mortgage over. If the properties are residential and the LVR is less than 80% then you are in a sound position. If the properties are commercial, then the maximum ratio needs to be more in the vicinity of 70%.
2. Consider your historical payment history with your current bank. If you have a good repayment history, then you are in a good position.
3. Consider your income and expenses. Whether you are a personal borrower or a business borrower you will need to demonstrate comfortable loan servicing capacity.

There are a multitude of other considerations as part of a loyalty assessment. Ultimately a big part depends on how you present your case to a bank to ensure they give you priority service and pricing.

Below is an example of a Lawrence accounting client who had been with the same bank for many years. His accountant noted that his client was paying a high interest rate on one of his investment properties and asked the loans team to contact the client.

After some initial research and comparisons, the client was positively surprised at the rate and potential monthly savings we could gain him. He was even more stunned when we pointed out the interest rate his existing bank was offering new to bank clients. His reaction was “Where is my reward for having been a loyal and good customer all these years?” He was happy for us to contact his existing bank and negotiate on his behalf. We were able to achieve a considerable rate discount, but the rate was still higher than what the market had to offer and what a new to bank customer would receive. In this instance the client decided to switch banks to take up a very attractive offer we had negotiated with one of our panel lenders. The client was ecstatic as the monthly saving covered their monthly gym membership.

Depending on a particular situation it might be beneficial to stay with an existing lender or as the example above demonstrates it can be rewarding to switch.

Having a mortgage broker involved will definitely keep your bank on their toes! We at Lawrence Loans will monitor your loans & interest rates, we know the market and we are happy to negotiate on your behalf and best of all. WE ARE LOYAL TO YOU.

– Kelly Yates, Senior Finance Broker

_______________________________________________________________________

Is your bank loyal to you?

At Lawrence, our diverse team of specialists will be able to undertake regular check-ups on the health of your loans.

Contact us today for an obligation-free chat about how this may suit your business.

This article is general information only. It does not give business, accounting, taxation, financial planning or other professional advice or service. It does not consider your specific situation, objectives or needs and if personal advice is required, a detailed analysis of your particular circumstances would need to be sought. Please see our Privacy and Disclaimers page for further information.