Money is a commodity, bought and sold by lenders. Just like other products, you can often save money by shopping around. Here are some points to consider as you shop for money.

First, are there any loan fees or other charges required to set up or service the loan? Some lenders will require that a loan fee of 1 percent, 2 percent, or more be paid in advance. Others will even roll the loan fee into the loan, allowing you to pay interest upon interest. Others will deduct a monthly service fee from each payment as it is made. This arrangement is not necessarily bad; after all, the lender must make his profit from you in some manner. Just make sure you understand what the actual cost of the loan is before you agree to it. You also need to know actual interest rates as you compare rates between lenders.

Second, consider whether your best option is fixed rate or variable rate interest. Fixed rate interest means the interest rate charged by the lender is the same throughout the life of the loan. Variable rate interest can vary during the term of the loan based on some outside factor. This factor is usually the cost of the money to the lender. Most variable or adjustable interest loans have caps specifying a maximum amount the rate can rise, both annually and through the life of the loan. The difference between the lender's cost to get the money and what he charges you is called the spread. From that spread comes his sales costs, office overhead, salaries, and profit. The spread is also based on the amount of risk he is taking in loaning the money to you. Higher risk means a higher spread. There are numerous indexes used to establish the cost of money. Review all of the options with your lender, ask which one makes the most sense for your needs, and get a second opinion.

Variable rate interest reduces the amount of risk the lender is taking, especially on long-term loans. He is virtually assured that, unless the money market goes crazy and goes over the cap, he will get his margin of profit from every dollar you send it. Lower risk means lower rates. The point is that you shouldn't disqualify variable rate loans from consideration. In many cases, they cost less than fixed rate loans and many lenders are more willing to make them.

But don't worry about getting the absolute lowest interest rate available. You may want to accept your regular lender's loan terms, even though it's a quarter of a percentage point higher, in order to maintain a mutually profitable relationship. That quarter point may only mean a few dollars to you and will reinforce your business relationship with your lender.