If you're not happy with the interest rate on your loan or credit card, you can always renegotiate it. But doing so involves changing the terms of your credit agreement. No matter what your reason for renegotiating the rate on your debt, you are more likely to succeed if you plan your strategy wisely.
Request a copy of your credit score. Each of the nation’s three major credit-reporting agencies -- TransUnion, Experian and Equifax -- are required by law to provide consumers with one free copy of their credit report annually. A high credit score can give you more negotiating power when it comes to asking for a lower interest rate, according to HSH, one of the nation’s leading publishers of mortgage and consumer loan information.
Read your loan documents or credit card agreement carefully, then shop around for a better interest rate. Get at least two or three quotes from your creditor’s major competitors that you can use as leverage when you get down to renegotiating. Have an idea from the start by how much you would like your interest rate reduced.
Contact your current lender or credit card issuer. Creditors have their own policies for renegotiating an interest rate. Request to speak to someone who has the authority to lower your rate.
Find out whether a penalty or other fees apply. If you would have to pay a prepayment penalty fee to refinance a loan at a lower rate, see if your lender is willing to waive a portion or the entire fee. Lenders differ in how they compute penalties, so ask exactly how much you would owe.
Calculate how much money you would save in interest by negotiating a lower rate for a loan. Compare the penalty and other refinance fees you would have to pay to the potential savings.
Remind your lender or card provider that you have always made your payments on time. If you think you need more negotiating power, mention that you are considering other options and be specific about the terms. Let the lender know that you are aware what rates new customers are being offered. Be calm and courteous yet convincing so the creditor has no doubt you will take your account elsewhere if you don’t get more favorable terms.
Ask if your lender or card company offers a hardship program for customers who are suffering temporary financial problems. If you are falling behind and need some time to catch up, you might be able to negotiate a lower rate and monthly payment for a few months. Your creditor might require that you write a letter explaining your situation. Some lenders and creditors are willing to lower the interest rate you pay to help you make your payments on time. After a specified period of time, the rate usually goes up again.
Items you will need
- Credit report
- Loan documents or credit card agreement
- Quotes from other lenders or credit card issuers
- Bankrate.com: Consumers Can Renegotiate Credit Card Rates and Fees – But It’s Not Easy
- HSH.com: Negotiate Your Loan Terms
- U.S. News and World Report: 6 Benefits and Rewards of Having Awesome Credit
- Money Management International: Learn About and Request a Lender Hardship Program
- The Globe and Mail: The Art of Mortgage Renegotiation
- Keith Brofsky/Photodisc/Getty Images