How to lower your interest payments to pay less to the bank and keep more of your money

Have a loan? All interest rates are negotiable. If you haven’t inquired about lowering interest rates on your credit cards or looked into a streamline refinance, read on as we share a few quick tips.

Then, if you haven’t already picked up your copy of Budgeting Sucks, grab it here.

When it comes to personal finance, one of the most common issues we see is that people are just paying interest on loans and debt. 

They often don’t realize that there are three key strategies – the three Rs – that can help lower interest payments.

The 3 R’s

1. The first R is restructure – how you restructure your loans and debt.
2. The second R is reallocate – taking funds from lower return investments to pay off debts charging higher interest, freeing up more cash flow.
3. The third R we want to emphasize is renegotiate. All loans and interest rates are negotiable, so you may be able to pay the same dollars you are now but get further faster. You may be able to pay something off sooner without having to sacrifice or save more in the short term.

We discovered this works when calling to cancel or change service plans – cable, phone, etc. The retention department will often offer much better rates to keep you as a customer. The same applies to credit cards. Call and indicate you are looking to cancel, balance transfer or that you are just shopping around for better offers. This often gets you to the retention team with the power to lower your interest rate.

There are four key factors that help improve your negotiating position. 

1. First, a credit score above 760 indicates you are a strong borrower and makes it easier to get better rates.
2. Second, collateral like a paid off car you can use to refinance higher interest debt.
3. Third, proper financial reporting so you look organized and low risk.
4. Fourth, the right connections to lenders suited for your specific situation.

For mortgages, “streamline refinancing” allows you to refinance with your current lender without all the paperwork of a normal refinance. If you have good credit, equity, and current payments, you may qualify to lower your rate with minimal costs.

Another creative strategy is intra-family loans. For example, parents making the downpayment on a child’s home to avoid PMI while earning better returns than other low risk options. The child pays less interest without PMI.

So in summary, constantly look for ways to renegotiate, restructure and reallocate to reduce interest costs. Use the techniques mentioned here to save more of your hard earned money.