A massive interest rate on your credit card or loan debt is a crushing blow to your financial freedom. On the low end of the spectrum, just 15% on a $1,000 balance is bad enough, but higher numbers can make that amount appear insurmountable.

It’s not impossible, however, to bring those numbers back under control and work your way towards greater financial independence.

One of the best ways to achieve this is by contacting your credit card company and requesting they give you a lower interest rate.Cardholders rarely take this step for fear of rejection or the possibility they might have to negotiate their rate down.

• How can you Negotiate your Credit Card Interest Rate?
• How can you Negotiate your Home Loan Interest Rates?
• When should you ask for a Lower Interest Rate?
• Can I ask my Bank to Lower my Mortgage Interest rate?
• What is a Good Interest Rate Savings?

How can you Negotiate your Credit Card Interest Rate?

Here is how to lower your credit card interest rate and take back control of your debt.

1. Strengthen your credit

Similar to the lenders for buying a home or car, credit card companies want to do business with customers on solid financial footing.

Read Also: How Payday Loan Interest Rates Are Calculated?

Strengthening your credit will lower your risk to the credit card company, which makes them more willing to lower your rate. So before making contact, pull your credit rating to see where your financial health stands.

If your credit is on the upswing, it’s an excellent bargaining chip, so sell that point when you call your card issuer. If your credit score needs fixing however, you might want to delay your call until the numbers are more solid.

Look at where you can achieve quick wins. Pay off a smaller balance or pay a sizable portion of a larger debt. Both will push your credit score upwards.

Always make it a point to make all payments on time as well as even a few missteps can hurt your credit rating. If you do have an excellent track of record of on-time payments, use it as a point in your favor.

2. Time it right

With a credit score above 670  — which is considered good — the second variable to consider is timing.

Did you recently pay off a vehicle, vastly lower some student debt or make a move to a less expensive house or apartment? Perhaps you recently received a raise?

All of the previous scenarios have one thing in common — they lower your debt to income ratio which makes you less of a risk to lenders, including credit card companies.

As with your credit score, monitor your debt to income ratio to ensure you maintain a healthy balance between major monthly obligations and your income. A debt to income ratio of 36% or less is considered good; 28% or less is ideal.

3. Know your numbers

The best negotiators are the ones that come to the table with useful and factual information; it’s no different when speaking with your card issuer. Know what you own and what you’ve paid — including the interest.

Have your credit score and debt to income ratio handy. Be prepared to explain where your numbers are, what you did to improve them, and how you plan on maintaining them.

The card company will verify everything you tell them. It helps to put a story behind those numbers to prove your commitment to fiscal responsibility.

The company will want you to convince them why they should provide you a lower rate, so be prepared and be honest. State facts and don’t embellish. Sooner or later, the card company will know if you’re worth the lower rate or not.

4. Line up other offers

The last step before calling the card company is lining the offers of lower rates from other cards. Whether you received them via email, mail or learned of an offer through other means, know what companies are providing to new clients. Create a comparison sheet so you can quickly flex your knowledge.

Credit card issuers will avoid losing business with you if you make a great case. Much like big box retail stores and their price matching tactics, a card issuer isn’t going to lose a customer over what amounts to a nominal fee.

5. Make the call

Finally, it’s time to make the call. Approach the call as a simple conversation — a request and not a demand.

Be polite, express the purpose for your call and make sure you’re speaking to a representative that can help you, if necessary, you can ask for someone who might carry more approval authority than the one with whom you’re speaking.

State your case in the order expressed above and mention the other offers you are entertaining. If the initial request is unsuccessful, don’t hesitate to ask if there are steps you could take to improve your chances for a lower rate.

You don’t have to be a skilled negotiator to lower your credit card’s interest rate. Solidify your credit, pick the right time and know your numbers and what other card companies are offering to present your case for a lower rate.

Should your current issuer say no, there’s no need to worry. There are other cards, and a number of them have no interest balance transfer offers that buy you plenty of time to gain your financial independence.

How can you Negotiate your Home Loan Interest Rates?

If you feel like your home loan repayments will never come to an end, the key can be as simple as negotiating to get a lower interest rate. It’s worth regularly reviewing your home loan to make sure you always have the lowest rate possible.

Read about the 5 steps on how you can negotiate a lower interest rate on your home loan.

1. Ask for the same rate new customers get

Don’t be afraid to contact your lender and ask for a better deal. Speak with confidence and ask for the same rate offered to new customers. You may find lenders will be willing to negotiate to retain their customers, provided you are in a strong position with no missed repayments etc.

If you have a good credit history and have been paying off your home loan over the past 10 years with no late repayments, you could be in a strong position to negotiate.

Negotiate the rate with your lender and you may be surprised how quickly they can be persuaded to lower your interest rate.

2. Do your research

Before to speaking to your lender about lowering your interest rate, shop around and compare what rates other lenders are offering for your situation. You can find out if there is a better rate available in mintes by using our online home loan platform.

Show your lender that you know there are lower rates available, this can be a great bargaining chip when it comes to asking them to lower your interest rate.

Even so, you should shop around and see what other lenders can offer you. Your lender may be unwilling to budge and you may decide to refinance with someone else. This brings us to the next step.

3. Be prepared to walk

When it comes to negotiating, you should always be prepared to walk away. If your lender is refusing to buckle and offer you a competitive rate, don’t be put off by the process of refinancing.

Nowadays, the process of switching lenders is fairly simple and can be completed in as little as a week in some cases. Hence, if lowering your interest rate is important to you, be ready to change lenders.

4. Play the loyalty card

As already mentioned, use your loyalty as a bargaining chip if you must. Many borrowers stay with the same lender for years, and if you have a good history with them, it can help when it comes to negotiating a lower rate.

Prior to asking for a lower interest rate, review your position and check that you have been making your repayments on time and that your LVR (Loan to Value Ratio has gradually been getting lower.

With this, you now have a current timeline of your loyalty and proof of being a reliable customer. This can be very helpful.

5. Make sure you’re the ideal borrower

Be the borrower banks love to lend to and give yourself the best chance of nabbing that low rate. Lenders look for a number of key things before calculating your interest rate.

Lenders want borrowers with:

• A low LVR – An LVR over 80% may hinder your negotiations.
• Good credit score
• No missed repayments or defaults
• Steady employment

Be aware of the factors that may hinder your negotiations:

• The type of customer you are e.g. self-employed, investor, non-resident
• Missed paying repayments
• Poor credit score
• If you owe over 80% of the property value

When should you ask for a Lower Interest Rate?

The average credit card annual percentage rate is now between about 17 and 24 percent, according to U.S. News calculations, and is still on the rise. But if you opened your account at a time when your credit wasn’t that great and you’ve since improved it, you could be paying a higher rate than necessary.

No matter the reason, if you have an interest rate that’s higher than you’d like it to be, it’s a good idea to try to lower it. A lower interest rate means any balance you carry will accumulate less debt each month and you can pay your balance down faster since more of your payments go to the principal instead of interest.

Take these steps to get a lower credit card interest rate:

Do Your Homework Before You Negotiate

Though simply asking can work, understand that you will likely have to engage in some negotiation to have your rate lowered.

Fortunately, you have the upper hand. “Credit card companies know that losing customers is very expensive for them, so leveraging that knowledge provides you with some room for negotiation,” says Conor Richardson, a certified public accountant and author of “Millennial Money Makeover.”

Ben Woolsey, director of marketing for Bulldog Media Group, which owns the personal finance site CreditSoup, says before you play hardball, have the numbers on your side.

According to Woolsey, you should know your existing balances and how much interest you’ve paid in the last year, so you can explain why your issuer should offer better than your current rate.

You should also research which lower-interest cards exist on the market and reference other offers you’ve received online or in the mail.

Improve Your Odds

Most credit card issuers will want to hang on to their best customers. If you have a shaky history as a cardholder, it might be time to take a step back and work on making yourself into a more attractive customer.

One factor that can greatly improve your chances of achieving a lower interest rate is a strong credit score. Good credit is an indicator that you’ve managed your debts responsibly in the past and are likely to continue doing so in the future.

A FICO credit score of 670 or higher is considered good credit, so you should aim for a score at that level or higher before you contact your issuer for a better rate. The issuer may want to see very good or excellent credit to consider lowering your rate, so you may need a score of 740 or higher.

Even so, a good credit score isn’t the only factor your card issuer will consider. You should also be able to prove you have a long history of making your payments on time.

“Make sure that you are consistently paying your monthly minimums,” says Richardson. “This allows you to demonstrate to your credit card company that you are a diligent customer and why it makes business sense for them to keep you.”

If you have a history of irregular payments, it can be a good idea to focus on making all your payments on time and eliminating some of your balance for up to a full year before attempting to have your rate lowered.

Call Your Credit Card Company and Ask

Once you’re prepared to negotiate and confident in your value as a customer, call the customer service number on the back of your credit card and talk to a representative about lowering your rate. Ask for the person’s name and direct line in case you get disconnected.

“One of the biggest things that people fail to do these days is to pick up the phone to call and ask for their interest rate to be lowered,” Richardson says.

“Competition is fierce among credit card companies.” You may find that simply calling and asking to have your rate lowered, while remaining “forcefully polite,” can take you a long way.

After all, the worst that can happen is the issuer says no. And even if you get a rejection, you shouldn’t stop there. Sometimes your success will depend on who you talk to.

So if you can’t persuade the representative to lower your rate, hang up, call back and speak with someone else. It can also help to ask for a manager, who might have more decision-making power.

“Mention your preference to leave balances in place if the APR can simply be reduced,” Woolsey says. If lowering your rate means keeping you as a customer, your card issuer may be inclined to grant your request.

However, if your request is denied, there’s still room to work out a deal. For example, you can inquire about temporary or promotional rates that the issuer might be willing to grant you.

“A six- or 12-month rate reduction could be easier to obtain than a permanent rate adjustment,” says Woolsey. This could give you the breathing room you need to pay down your balances before the rate readjusts.

Finally, if your credit card company still refuses to budge, explain you are willing to close your account once your balance is paid off and go to a competitor. Richardson says, “It can help to mention specifically where you would go.” That might be the final straw that persuades your card issuer to bend.

If your negotiations are successful, it’s a good idea to ask your issuer to send you confirmation of the rate change in writing.

Take Advantage of Other Options

In the end, if your credit card company isn’t willing to lower your interest rate, it may be best to move on to a better deal.

Be sure to research your options. “Not all credit cards are the same,” says Richardson, adding that it pays to take your time in selecting a new card. Use online comparison tools that will let you evaluate multiple credit cards at once according to your desired features.

Although getting a better interest rate may have sparked your desire for a different credit card, make sure you’re paying attention to other card factors, including annual fee, rewards and benefits.

If lowering your interest rate is your main concern, look for a card that offers a balance transfer deal for new customers, which would allow you to move your balance from your current credit card to a new one, usually with no interest during an introductory period.

A balance transfer offer could give you time, often 12 to 18 months, to pay down your debt at zero percent interest – and no interest is far better than a reduction in your interest rate.

Balance transfers do usually require a fee. It’s common to pay around 3 to 5 percent of the balance transferred.

So if you transferred a $1,000 balance, for example, expect to pay $30 to $50. Despite the added cost, however, paying zero interest for a year or more could mean the fee to transfer your balance is well worth it.

Can I ask my Bank to Lower my Mortgage Interest rate?

While it’s not all that difficult to refinance a home loan, it does take a bit of time and energy, and you generally need to qualify for the thing. Not everyone qualifies for a mortgage for one reason or another, and the same goes for refinancing an existing loan.

For example, if your credit score isn’t quite up to snuff, or you don’t have the required income to keep your DTI below key levels, you may not qualify.

This means you might be locked out when it comes to obtaining a lower mortgage interest rate in times when rates are favorable.

There are also times when it just doesn’t make much sense to refinance because rates are higher or similar to what you’ve already got.

So what are you to do if you can’t or simply don’t want to refinance, but still want a lower rate? Well, there are some options to consider.

Just Call and Request a Lower Rate

While not conventional or at all common, some folks have obtained lower interest rates simply by calling up their mortgage lender and requesting one.

You need to indicate that you have no interest in refinancing with them because otherwise they’ll just take you down that route.

It’s kind of similar to the old credit card trick where you phone up and say, “Hey, I’m sick and tired of paying 20% APR!” Then they put you on hold and come back and tell you congratulations, your rate is now 12%. Still bad, but lower!

Perhaps it won’t be that easy, or anywhere close to it, but sometimes it’s just a matter of being the squeaky wheel if you want a lower interest rate.

Your chances might be better if the originating lender also services your loan (collects your payments each month). And if your existing rate is significantly higher than current rates.

If they believe you’re going to take your business elsewhere, they might be willing to help you out.

Of course, at that point you could be asking yourself why not just refinance to an even lower rate, assuming you’re able to.

Negotiate Directly with Your Loan Servicer or Lender

There are also a number of programs geared toward those who are having trouble making payments each month, or difficulty refinancing via traditional means.

The two notable ones over the past several years have been HAMP and HARP, both of which allowed homeowners to obtain lower mortgage rates via special government programs.

These are being phased out soon, but being replaced by permanent programs set up by the likes of Fannie Mae and Freddie Mac.

There are also proprietary loan modification programs available (guidelines vary by individual lender) that may provide lower interest rates to existing customers.

Again, if you don’t take the time to contact your lender/loan servicer, you won’t know about them.

Take Advantage of a Mortgage Settlement

Thanks to some questionable practices by the big banks and loan servicers during the housing crisis, some lucky homeowners were offered lower mortgage rates as restitution.

A notable mortgage settlement between Bank of America and the U.S. Department of Justice resulted in 2% fixed mortgage rates for some fortunate borrowers.

Of course, they probably went through a lot to get that point. But one common theme is that not all homeowners pay attention to or take advantage of these things, and as such aren’t duly compensated.

Keep an eye out for legacy claims, and if they apply to you, it might be possible to save some money or secure a better rate in the process, all without refinancing.

Streamline Refinances Can Be a Lot Easier

Even if you’re not eligible for these programs or able to negotiate a lower rate, it might be possible to execute a streamline refinance.

As the name implies, it’s a faster and easier way to refinance a home loan for the express purpose of securing a lower interest rate.

This option allows you to refinance without the typical requirements like a minimum credit score or maximum LTV, and with limited paperwork.

Even though it’s technically still a refinance, it should prove to be a lot easier to qualify, and it shouldn’t be as painstaking of a process.

Look Into a Recast Instead

There’s also the lesser-known loan recast, which like a refinance, can lower the monthly payments on your mortgage. The difference is you’re simply adjusting the amortization schedule of the loan.

Let’s assume you’ve been paying extra each month to lower your outstanding balance, which is great for saving money long-term, but does nothing to lower subsequent monthly payments.

If you want your lower balance to be reflected in your remaining payments, you can request a recast from your lender or servicer, which will re-amortize the loan.

Then you should have lower monthly payments going forward, without a refinance or the closing costs that come with it. There may be a small recast fee though.

The beauty of the non-refinance route is that you also don’t reset the clock on your mortgage. In other words, you don’t extend the term with a fresh loan.

Pay More Each Month and Enjoy the Same Savings

Another thing you can do to save money without a mortgage refinance is to simply pay more each month, assuming you’ve got the cash on hand to do so.

This is yet another reason to set aside cash for a rainy day, or simply to better manage your debt when it’s favorable.

The more you pay above what you owe each month, the more you’ll save over the course of your mortgage term, regardless of your interest rate.

In effect, extra payments, such as biweekly ones or simply an additional payment each year, lower the amount of interest you pay.

While your mortgage rate won’t change, nor your monthly payment, the amount of interest paid will, which is basically the same deal as a refinance without all the paperwork and qualifying.

Go with an ARM and Hope for the Best

If you want a self-service mortgage, you could also just go with an adjustable-rate mortgage, which will rise and fall over time as the economy does its thing.

While this might sound silly, tons of homeowners who took out ARMs prior to the recent housing crisis actually wound up with rock-bottom interest rates without lifting a finger.

They actually benefited tremendously as mortgage indexes hit all-time lows, assuming they kept their homes and their original mortgages.

Of course, this isn’t for the faint of heart, and the way things are looking at the moment, interest rates seem to be on an upward trajectory.

Still, this is one way to potentially lower your interest rate without refinancing. Or doing anything at all.

Use a Second Mortgage to Pay Off the First

One last trick some folks use to reduce their mortgage interest expense is opening a second mortgage to pay off the first.

It’s basically a form of arbitrage where rates are lower on the second than the first for one reason or another.

This can be done with either a fixed-rate home equity loan or adjustable-rate HELOC. But it takes a bit (sometimes a lot!) of tinkering and money management skills to get it done.

So in the end, you might just be better off refinancing your mortgage or sticking to some of the other options discussed above.

The good news is there are always plenty of options available to those who manage their credit and finances properly.

If you have excellent credit, maintain steady employment, and set aside cash in a savings account, you should have a variety of tools at your disposal regardless of which direction interest rates are going.

What is a Good Interest Rate Savings?

Banks and credit unions generally don’t change savings rates on an hourly, daily or even monthly basis. In fact, under normal circumstances, it’s common to see APYs remain the same for several months.

It’s important to note, however, that rates are variable and theoretically can change at any time. In addition, many banks will change their rates based on what their competitors are doing.

Read Also: Payment History is The Biggest Part of Your Credit Score: Here’s How to Fix it

You will often see groups of banks increase or decrease their APYs at around the same time, especially if the Federal Reserve recently hiked or cut rates, as with the emergency rate cuts of March 2020 in response to the coronavirus pandemic.

To get the best yield for your money, it’s a good idea to check out the best savings rates on a regular basis — at least once a month.

When you’re shopping for the account that fits you best, these options are worth a look.

• Synchrony, 0.60% savings APY with no minimum to open account, Member FDIC.
• Capital One 360, 0.50% savings APY with no minimum to open account, Member FDIC.
• Varo, 0.81% savings APY with no minimum to open account, funds insured by the FDIC.
• Vio Bank, 0.66% savings APY with $100 minimum to open account, Member FDIC.
• CIBC U.S., 0.62% savings APY with $1,000 minimum to open account, Member FDIC.
• Ally Bank, 0.60% savings APY with no minimum to open account, Member FDIC.
• Sallie Mae, 0.50% savings APY, no minimum to open account, Member FDIC.

Conclusion

If you notice that your interest rate whether on credit cards or your home loan is too high, it might be time for you to negotiate the interest rate. You might feel it is not necessary, but with the tips above you can get a lower interest rate.