Previously, we talked about the effect that the rise in interest rates will have on your personal finances. Now we’d like to talk about solutions that can help you to lower your debt and maintain lower interest rates for the future.
1. Know Your Finances
One of the first things you should do is organize your finances and create a budget. Once you have done this you should ask yourself two questions.
Which of my balances are variable and/or have the highest interest rates?
Are there ways that I can lower my monthly expenses to refocus funds to pay down my debt?
2. Pay Down Debt More Aggressively
Once you’ve made this assessment, apply what you’ve learned to pay down your debt more aggressively.
For example, most credit cards will be affected by the change in interest rates, so try to focus on paying as much as you can each month. Focus on paying down the higher interest cards and the cards that are closer to their credit limit first.
The same may apply if you have a variable rate mortgage. If you can, try to pay more than your monthly payment each month. This helps negate the rise in interest rates by lowering your principal.
3. Re-Negotiate Your Interest
Credit card companies don’t want you to know this, but you can renegotiate your interest rate.
This is more likely to succeed if you’ve been a good customer with no delinquent payments, but you’re allowed to do this every year or so.
There are a number of scripts available online, but the fundamental points you need to make are:
1. When you call, make sure you’re connected with a credit account specialist, or someone empowered to negotiate a lower rate.
2. Know your credit history so that you can demonstrate that you’ve been a good customer.
3. You’re considering moving to a credit card with a lower APR.
4. Ask them if they can reduce your interest rate by three to five points.
5. Give them room to come back with a counter-offer of a one to three-point reduction.
6. Make sure that you request written notification of the terms of the rate decrease.
Depending on your balance, even a shift of a percentage point or two can make a big difference.
4. Refinance Your Home Mortgage
If you’re carrying a higher than average mortgage, you may want to see if you can refinance at a lower interest rate.
5. Take Advantage of Credit Counseling
If you’re concerned about the rise in interest rates, working with a Certified Credit Counselor can help. A credit counselor can help you to organize your finances, create a budget and propose solutions that can help you stay one step ahead of the rise in interest rates.
6. Debt Management Plan
If you’re carrying balances on high interest credit cards, a debt management plan can significantly lower your interest rates and allows you to lock in those lower rates until the balance of the card has been paid off.
Want to learn more about credit counseling or a Debt Management Plan? Schedule a free counseling session today or call us at 800-920-2262.
