When you’re paying off your debt, it can often feel like swimming upstream. You diligently make your payments, and then at the end of the month, interest charges are applied, and half of your progress is wiped away. The higher the interest rates on your debt, the worse these monthly charges will be, and the longer it will take you to become debt free.
Paying high-interest rates on your debt can be frustrating, discouraging, and could even lead you to quit trying to pay your debt off altogether. For these reasons, it’s important when you start paying off your debt that you try and lower the interest rates on your debts as much as possible. Lowering your interests rates will not only help you stay enthusiastic about your debt repayment, but it will also help you pay your debts off faster and waste less money paying interest fees.
There are several strategies you can use to lower the interest rates on your debt, and we’ll go through each one here in the order in which you should try them.
Negotiate a Lower Interest Rate
The first strategy you can try is honesty. If you have a debt that you’ve been trying to pay off, but the interest rate keeps getting in the way, the first thing you should do is call your credit provider and tell them your situation. Tell them you want to pay off the debt and ask if there’s any way they could lower your interest rate, at least for a period. Your success with this strategy will vary by provider, interest rate, and balance, but it’s a good idea to try it as your first line of defense against high interest rates.
Move Your Balance to a Lower Interest Product
If you can’t get your interest rate lowered by more than a few points, you should consider moving your debt to a lower interest rate product. For example, if you have credit card debt at 19.99% interest, and you can’t get the interest rate lowered, you should consider transferring your debt to a line of credit which will have an interest rate closer to 5%.
Moving your debt to your line of credit will dramatically reduce the amount of interest you pay over the course of paying off your debt, but it’s very important that you don’t run up a balance on your credit card in the meantime. If you do this, you’ll be stuck paying off both debts and be in more debt than ever. To avoid running up a balance on your credit card, simply call the credit card provider and ask them to lower your overall credit limit. A lower credit limit will prevent you from charging too much to the credit card in the future.
Consider Balance Transfer Credit Cards
Finally, there is one more option for lowering your debt’s interest rate, and that’s a balance transfer credit card. Balance transfer credit cards offer the user a low promotional interest rate (usually around 0.00% - 2.00%) for a set period. Transferring a portion of your debt to a balance transfer credit card can be a great way to decrease the amount of interest you pay, but there are some caveats.
First, you must pay off the entire balance before the promotional period ends, or you will be charged interest rate penalties. Second, the low interest rate only applies to transferred balances, and not purchases, so you shouldn’t use this credit card for daily spending.