5 Oct 2015

A lending scheme in which a financial institution or other lender offers a consumer the option of purchasing or refinancing a second loan at a reduced rate. BOGO loan schemes may involve a new loan, a loan refinance, or a combination of the two options. BOGO stands for buy-one, get-one, and is a phrase also found in other consumer spaces.

BOGO loans are most commonly found in the consumer loan space, and are considered part of a financial institution’s marketing efforts. In order to draw in the consumer to purchase a loan at a standard rate, a bank or credit union will offer a second loan at a reduced rate. If the bank has the available capital to try this technique, then it may be at a competitive advantage when compared to competing financial institutions. This type of loan special is often treated as a one-time offering, though the special may occur several times a year or may be ongoing.

The amount of money offered through this type of consumer loan tends to be less than loans for big-ticket purchases. For example, BOGO loans are unlikely to be offered for mortgages, lines of credit, or home equity. The second loan offered at discount is often smaller than the primary loan, and is more appropriate for purchases such as automobiles, home improvements, and debt consolidation.

BOGO loans may involve refinancing an existing loan. Banks may offer to refinance loans made by competitors, though the type of loan that they may be willing to refinance may be limited to personal or auto loans.

Banks are unlikely to restrict the second loan taken out to the same type of loan as the first. For example, a consumer may take out a loan to purchase an automobile, as well as a personal loan to cover other expenses.

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