How to Reduce an Interest Rate
Credit is critical to businesses, individuals and governing authorities. Lenders collect interest payments as compensation for taking upon the risks of making loans. Further, higher interest rates are demanded for riskier projects and less creditworthy borrowers. Lenders complete the balancing act of charging the highest interest rates possible for minimal risks of default and loss of market share. Conversely, borrowers research the market to secure the lowest interest rates available for debt. Proper strategy requires self-assessment and comparison shopping.
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Instructions
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Self-Assessment
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Request your personal credit report and analyze current debt levels. The Fair Credit Reporting Act allows consumers one free credit report annually. Order your free credit report from annualcreditreport.com.
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Check your credit report for fraud and any other discrepancies. Dispute these claims prior to moving forward and requesting lower interest rates.
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Work to pay all bills in full and on time. Commit to higher payments than just the minimums upon debt that you already carry. Prioritize debt payments in descending order according to interest rates. You will save money by paying down high-interest rate debt, first. Doing so improves your credit score---making you more attractive to lenders.
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Take note of the offers available to you within your current debt portfolio. You may maintain credit cards with low balances, built up home equity that can be borrowed against to transfer high-interest debt toward or refinance for lower rates.
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Sell off assets or find work that provides extra income when interest expenses reduce monthly cash flow. Use extra cash to pay down debt.
Comparison Shopping
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Telephone your lender and remain truthful concerning your case. Simply indicate that you are looking for lower interest rates to save money. Hopefully, you have been making on-time payments and may negotiate from the strength of a solid customer.
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Alert lenders that refuse to lower interest rates that you are interested in shopping around and transferring balances to other companies to achieve this goal. Ask to speak to higher-level managers that are more so willing to cut deals.
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Begin transferring balances towards credit cards and loans that feature lower interest rates and have available credit to accept more debt. Do so when negotiations with the company that holds the high-interest loan fail to secure lower rates.
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Apply for new loans, credit cards and mortgages that offer low interest rates. Transfer debt, or refinance into these new loans.
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Tips & Warnings
The Federal Reserve Board is responsible for U.S. monetary policy. Watch the Fed to see if it is lowering interest rates, which is a good time to request reduced rates upon your own accounts. The Wall Street Journal publishes benchmark interest rates daily and is a good reference point for comparison.
Refinancing often carries fees and closing costs. Ensure that newly offered interest rates are lowered enough to make up for these expenses. Consumers that lack the time and skills to navigate through consumer debt markets themselves should hire competent financial advisers to provide guidance.
