One of the most rewarding parts of money management is getting out of debt. It is possible to pay your bills off faster if you can make banks compete with each other for your business. The Federal Reserve has taken steps to lower interest rates in order to stimulate the economy, and this is an opportunity for you. When the Fed lowers rates, banks offer lower rates too. But they don’t offer them to existing customers. You have to call in and ask for them. Banks are counting on you not paying attention and continuing to pay higher rates, but you don’t have to. With just a little bit of effort, you should be able to renegotiate your terms and save yourself thousands of dollars. Keep reading to find out about the easiest ways to save.
- Getting Lower Interest Rates Saves You Time and Money
- How to Improve Credit Scores
- Search for the Best Interest Rate
Getting Lower Interest Rates Saves You Time and Money
When you borrow money, the lender charges you interest until you pay it back. This encourages you to pay your debts faster, but it also provides an incentive for banks to give you the loan in the first place. Your interest rate is determined by how safe it is for the bank to loan you the money. The lower your rate, the faster you can pay off the loan, and the less it will cost you over time.
Mortgage rates are generally the lowest because they are secured by the property you own. If you do not pay your mortgage, the bank can take your house back. Property usually increases in value over time, so banks can often recover the full value of the loan. This makes mortgages pretty safe for the bank.
Cars typically decrease in value over time, so there is more risk to the bank than on a home loan. If they have to repossess your car, the bank is still likely to lose money, so your rate is higher to cover the increased risk.
Credit cards have the highest interest rate because they are not secured by anything. If you default on your loan, the bank is unlikely to recover anything at all.
As the Federal Reserve lowers interest rates, they lower the costs of the banks. You can take advantage of this in several ways. You can renegotiate with your bank, you can transfer your loans to lenders with lower rates, or you can consolidate multiple loans into one.
Saving money can be easier than you think. Call all of your lenders today and simply ask them if a lower rate is available. It only takes a few minutes and pays off immediately.
How to Improve Credit Scores
It’s easier than ever to improve your financial health. Your credit score determines how risky the banks think you are and can help you know if you’re going in the right direction. The higher your credit score, the less interest you have to pay because the banks trust you more. Having a high credit score is helpful in getting lower interest rates.
Most people think that your credit score is a record of how reliable you are at paying your bills on time. While this is an important part of your credit score, there is a lot more that goes into your number. Here are some important tips that can give your credit score a boost.
• Keep Your Credit Utilization Ratio Low
If your total credit limit on all of your cards is $100,000, you want to keep your total balances below $30,000, or 30% of your total. If you can keep it below 10% (or $10,000) it’s even better. This is a sign of self-discipline and responsible behavior that banks like to see.
• Request Credit Line Increases
This will reduce your Credit Utilization Ratio as long as you do not increase your spending.
• Keep Your Oldest Account Open
A long history looks good on your credit report. It tells lenders you pay your debts and are stable over time.
• Pay Off High-Interest Loans Faster
When you pay extra on high-interest loans, your total debt decreases faster because you are paying less interest.
• Track Your Credit Report
Banks make mistakes too. If you get a copy of your own credit report, you can spot bank errors and get them fixed. There’s a psychological impact too. The more aware you are of your credit score, the easier it is to make better choices.
Search for the Best Interest Rate
Many banks advertise balance transfer offers to get your business. Some banks even offer 0% rates for a short period of time. If you take advantage of no-interest options, you can consolidate your bills and pay them off screamingly fast.
Once you’ve tried these options, another way to get a low rate is through a consolidation loan with your bank. It’s a great way to get rid of the high interest rates from credit cards and store cards. If you own your own home, you may qualify for a lower interest rate on your mortgage. When you refinance, ask your bank if you can combine your other debts together into your mortgage. This is one of the easiest ways to secure the best possible interest rate.
An important and often overlooked part of staying on top of your finances is the need to reward yourself for good behavior. It’s easier to save money and stick to your budget when you can look forward to a treat. There are lots of little luxuries we enjoy, so why not try tying them to good behavior? If you like to splurge on a nice restaurant, make it a condition of meeting one of your goals. You’ll not only be encouraging responsible behavior, but it will also make your night out more meaningful and enjoyable.
When you meet major goals, it’s time for a major reward. Budgeting for a trip or vacation is easier when you have the lowest interest rates available. You’re also more productive when you take regular breaks from work, so it’s a win-win.
I recommend you take a time-out today and check the interest rates on your debts. There’s no reason not to, and a simple phone call may be the key to saving hundreds—if not thousands—of dollars.