How does a bank try to make sure that their existing customers use them when they want a take out a loan?
They often reward them for being loyal by offering them a lower interest rate than they would normally charge. This reduced/lower rate of interest is called a 'preferential rate'. Normally at most, a 'preferential interest rate' on a loan is a couple of percentage points lower than a bank's 'standard interest rate'.
Not only do banks offer existing customers a 'preferential interest rate' when they take out a new loan, but also when they open a new type of savings account with the bank (they receive a higher interest rate on their money than the standard rate).
From my own experience, you can often find a better rate of interest for either a loan or savings accounts from another bank or lending institution than what you would get with a 'preferential rate' from your existing bank. So it's important to shop around to get the best deal.
Preferential Rate.
Annual Percentage Rate, Redemption Penalties, Fixed Interest Rate, Variable Interest Rate.
To learn more vocabulary connected to loans, you can do a free online exercise on bank loan vocabulary.