How to Decrease Your Interest Rate

Securing a lower interest rate on debt can produce serious savings. Consider a mortgage. If you have a 4.2 percent interest rate on a 30-year, $250,000 loan, you'll pay nearly $190,000 worth of interest over the life of the loan. But raising the interest rate to 5.77 percent and you'll shell out almost $90,000 in additional interest payments. Along similar lines, a 60-month new car loan with a 5 percent interest generates nearly $4,000 in interest payments, whereas a rate of 8.5 percent spawns nearly $7,000 worth of interest. Trying to get your high rates reduced is worth the time and effort.

Secure a copy of your latest credit report. You can access one annual report for free from each of the three main credit reporting agencies—Experian, Equifax and TransUnion—at the Annual Credit Report website. As of 2010, you'll pay a fee to see your credit score. It makes sense to assess your credit before you attempt to get a lower interest on any type of loan. Your credit might influence your chances and level of success.

Fix inaccuracies on your credit report. If something is amiss, follow the procedure the credit reporting agency supplies to get it corrected. You will see prompts for this when you view your report. If you see credit blemishes of your own doing, such as late payments or a heavy debt load, attempt to correct them and improve your credit score before attempting to lower certain types of interest rates.

Contact your lender. Regardless of the type of loan—credit card, mortgage or auto—this is the best place to start. To keep your business, the creditor might be willing to work out an arrangement for you. Your best chance at seeing results on just one call is with credit cards. Many credit card companies will lower your interest rate if you ask, particularly if you have good credit and threaten to transfer your balance elsewhere.

Pursue refinancing opportunities. With a mortgage loan, you might be able to work something out in-house with your lender or a competitor. Depending on your circumstances, the lender might see if you qualify for a refinance program through the government's Making Home Affordable plan. With an auto loan, your current lender or a competitor might be willing to offer you a refinanced loan with a lower interest rate, especially if you have good credit. The credit card parallel of a refinance is to transfer your balance to another card with lower introductory or permanent interest rate.


  • If you are experiencing financial hardship, your mortgage lender will likely see if you qualify for the Home Affordable Modification Program. The first thing your lender will do under this program, if you are eligible, is lower your interest rate to as low as 2 percent in an attempt to get your monthly payment to no more than 31 percent of your monthly income.

About the Author

As a writer since 2002, Rocco Pendola has published numerous academic and popular articles in addition to working as a freelance grant writer and researcher. His work has appeared on SFGate and Planetizen and in the journals "Environment & Behavior" and "Health and Place." Pendola has a Bachelor of Arts in urban studies from San Francisco State University.