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Study Finds Americans Don’t Shop for Home Loans

Study Finds Americans Don’t Shop for Home Loans

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We bargain hunt for the best hotels, electronics, flights and even shoes, but in a recent national survey of American consumers, LendingTree found that only 14.23% of shoppers actually comparison shop for any types of loans, including their mortgage.

“It’s an interesting phenomenon,” Andrea Woroch, LendingTree’s consumer savings expert, said. “Consumers are generally very savvy with their shopping behavior when it comes to day-to-day purchases and material goods. But once it comes to a major financial investment, we see a collapse of the normally rational pattern of behavior and mentality for saving.”

In their nationally representative survey of 1,024 American consumers, LendingTree found that 79 percent of Americans considered themselves bargain hunters. Nearly all Americans (92%) have researched prices online before purchasing an item. However, there is a disparity when shopping for the biggest purchase they’ll make.

“Consumers sometimes may to be too focused on price and fail to consider the lifetime cost of interest which is really where banks and lenders make their money,” Woroch said. “Over a five-year auto loan or thirty-year mortgage, a one percent difference between interest rates can easily translate to thousands of dollars.”

Comparison shopping for loans has the greatest opportunity for consumers to realize substantial savings. However, most consumers seem to waive their right to shop around for the best deal or research available options.

“There could be a number of causes for this irrational behavior and it may vary among types of consumers,” Woroch said. “One is simply that many Americans don’t understand the long-term costs associated with compounding interest and the time-value of money. Another possibility is that consumers are uneducated about loan shopping. They may not know the importance of comparing interest rates before financing a purchase.”

Furthermore, LendingTree looked at data to calculate the amount of money consumers are missing by not comparison shopping mortgages. In the third quarter of 2015, mortgage shoppers who received offers from at least two lenders through LendingTree experienced an average rate differential of .32 percentage points between the lowest offer and highest offer. This is a difference of $48.06 per month. Choosing the lowest offer could save a borrower roughly $17,300 over the life of the loan.

“It’s easy to become emotionally involved with the purchase itself or to find the loan process so frustrating that you would rather finalize the purchase instead of shopping around,” Woroch said. “But is the convenience of not shopping for loans really worth thousands of dollars? Additionally, perceived convenience is a major trap consumers can fall into. With technology improving our ability to find the best deal, saving money on your major finances is also just as easy as online shopping.”

Frequency Which Consumers Regularly Use Comparison Shopping Websites For
Good or Service Frequency
Electronics 67.63%
Flights/Airfare 67.50%
Hotels 63.82%
General Merchandise 51.13%
Appliances 45.79%
Clothing 36.30%
Loans (Any: personal, mortgage, auto, etc.) 14.23%

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