Credit Cards , Personal Finance

How To Negotiate Lower Interest Rates

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 7 minute read

You may save a lot of money by making a simple phone call. Here’s what to do if you’re unable to persuade lenders to change their minds. There’s a good chance you’re not the only one struggling under the weight of debt. Consumer debt in the United States has reached a record high of $13.3 trillion, according to a report released in 2018 by the Experian credit reporting agency.

In addition to paying the principal, excessive interest rates on your credit card debt might have a negative impact on your finances. Many lenders may cut your interest rate if you request it, which can help ease the burden of debt repayment.
Here’s how to get your credit card, student loan, and even your home interest rates lowered.

Credit card interest rates can be lowered by negotiating lower interest rates

CFPB’s recent credit card market research found that the average APR for credit cards is between 16.6 percent and 17.2 percent, according to a press release. If you’re unable to pay your monthly bill in full, interest charges can soon pile up.

You’d have to pay more than $970 in interest only to pay off a $2,000 credit card amount if you made a $50 monthly payment at a 17 percent annual percentage rate. Your interest costs may be reduced by more than $800 if you could have your rate lowered to 15% APR.
Negotiating lower credit card interest rates can save you a lot of money, but you have to be ready for it.

Review your odds

Take a look at how you stack up as a client to see if you may get an interest rate reduction. Your long-term cardholder status may provide you leverage in the event you want to haggle over your interest rate. Other factors that might help you get a lower interest rate include a long history of making on-time payments or making a lot of high-ticket purchases on the account.

Your account’s initial opening date is an additional factor. A lower interest rate may be available if your credit score improved after you opened the account, even if your credit was less than perfect when you opened the account in the first place.

Make your case in advance.

The next step is to collect all of the information related to your account. As an example, keep in mind the following details:

  • When you open the account, please include the date.
  • What is the current rate of interest on your loan?
  • Your average monthly and annual balances, respectively
  • A comparison of prices of rivals

Your monthly bill or online account should have the majority of this data readily available to you. Once you’ve jotted down your account information, it’s time to compare credit cards with similar features and interest rates.

Make the call

In the end, you’ll want to talk to a professional who can cut your interest rate when you phone your credit card company. The first and last names of each agent you communicate with should be recorded in the event that the phone connection is terminated.

Start with the essentials and see if you can avoid a lot of back-and-forth bargaining. Depending on the issuer, you may get an immediate yes without having to argue.

If you’re unsuccessful

To thank a person who doesn’t provide the solution you’re looking for, simply say, “Thank you. May I talk with your manager? A decision-maker is on the phone, so respectfully but firmly explain your argument and give facts about the competitive interest rates you investigated beforehand.

If your credit card issuer refuses to cut your interest rate, you may want to consider applying for a zero-interest balance transfer card or taking out a personal loan to consolidate your debt.

How to get a better deal on your student loans’ interest rates

Negotiating interest rates on student loans is notoriously tough. If you have student debts, though, there are a few choices you might consider.

Inquire about the loans you’ve taken out.

Whether you have federal student loans or private student loans will determine your possibilities. Undergraduate Direct Loan interest rates are set at 5.05%, graduate Direct Loan interest rates at 6.60%, and loan interest rates are set at 7.60% for the 2018-19 academic year. These are non-negotiable charges set by the United States government.

Interest rate savings are available to students who hold private student loans. Be sure to have all of your private student loan information at hand before contacting your lender, such as the amount owed, interest rate, and length of your loan, before contacting your private lender. You’ll be able to debate your alternatives with complete transparency.

Get your interest level as low as possible.

Remember that when it comes to negotiating lower interest rates on student loans, you are your own best advocate. Check with your financial institutions to see if they provide interest rate savings.

Automatic payment discounts of 0.25 percent or higher discounts for new student loans are common with lenders when you already have a connection with them (if you also have a checking account with the institution, for instance). Additionally, some lenders provide additional reductions if you’ve made on-time payments for a particular number of years.

Call from the phone

Dial the phone number shown on your monthly bill or on your online account. Make sure you have your account number, personal information, and information on any interest rate discounts you’ve uncovered on your credit card ready.

Make a note of the representative’s complete name and direct phone number. Begin by stating that you’d want to negotiate a possible interest rate discount, and then present your case. 

Try to find out whether they’re willing to compromise on other aspects.

It’s possible that, if you’re unable to reduce your interest rate anymore, you can reduce your monthly payments in another method. If you’re eligible for an income-driven repayment plan for federal loans, or if you’re eligible for a payment suspension for private loans, discuss these possibilities with your loan officer.

You might expect to pay more interest in the long run because of these changes. However, looking into these options might provide you with the financial breathing room you need right now.

If you’re unsuccessful

Student loan refinancing may be an option if you are unable to get a lower interest rate from your current lender. Refinancing federal loans into private loans involves giving up government benefits, such as income-driven repayment plans and student debt forgiveness programs, when you do so.

Consider if a cosigner is a good fit for your refinanced loan as well. You may be able to get a cheaper interest rate on your refinancing application if you include someone with great credit. Know that your cosigner is legally liable for your debt if you don’t pay up, so be aware of this fact before you agree to a loan.

How to get a lower mortgage interest rate

It is estimated that, as of May 2019, the average 30-year fixed-rate mortgage rate was 4%, according to HSH Associates. If you’re already a homeowner, here’s how to get a better deal on your mortgage.

Ensure that your credit is in order.

Because mortgages are risk-based loans, you’ll need to have a stellar credit history to get a better deal.

Before contacting your lender, it’s a good idea to improve your credit score. 35 percent of your FICO credit score is based on your payment history, so pay your bills on time every month. In the meanwhile, avoid adding to your debt by making those payments. Thirty percent of your credit score is based on your credit usage ratio. It’s possible that lowering your other bills will help you qualify for a reduced mortgage rate.

Be ready to provide an explanation

The best way to begin the conversation is to compare mortgage loan rates from several lenders. To get the best possible interest rate, it’s a good idea to gather a few estimates from several lenders.

To get a lower interest rate on your mortgage, you’ll need to explain your situation to your lender if you’ve had a substantial change in your financial situation. If avoiding foreclosure requires working with your lender, you may be able to get a more reasonable payment schedule.

Make the call

Negotiate your mortgage loan interest rates directly with your lender. Keep a detailed record of every phone call, including the recipient’s full name and phone number. Have interest rate proposals from other lenders available if you’re looking around for new mortgage loans, and check if your favorite lender can at least match the lowest rate. Request a meeting with someone in charge of making a decision on your rate request if the loan officer is unable to assist you.

To have your current mortgage rate dropped, tell your lender this when you call them. Tell your servicer why you’d prefer not to have your conditions changed other than your mortgage rate — for example, if you’ve improved your credit score since creating the account or if you’re suddenly facing financial difficulties. Ask about additional mortgage rate reduction choices if you get pushback.

Inquire about options for refinancing your debt.

For those that qualify, lenders may provide loan modification programs in addition to decreasing the interest rate on their mortgages. You may be eligible to extend your loan term or convert from an adjustable rate to a fixed-rate mortgage as part of a loan modification program.

To be qualified for a loan modification, you’ll most likely have to provide proof of financial hardship, but this route can help you get through challenging times.

If you’re unsuccessful

It is possible to acquire discount points if your lender refuses to provide you with a mortgage rate decrease directly. Prepaid interest is what we mean by discount points. There are a number of other expenses associated with buying a property that may be discussed during the negotiation process.

Refinancing may be an option for current homeowners who have a high mortgage rate. In order to guarantee you can afford your monthly payments while keeping the total cost of the loan to a minimum, use a mortgage refinancing calculator.

No matter how much money you have or how much debt you have, there are strategies to minimize your monthly debt load to a minimum. Calling your lender is often the most effective approach to deal with excessive interest rates.

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