Negotiating is a powerful tool that can save you money on your loans and credit cards. And the good news? It’s not as scary or difficult as it sounds! You can negotiate interest rates, fees, and other terms with lenders and credit card companies with these four easy steps:
Make sure you are comparing apples to apples.
You need to make sure that you are comparing apples to apples. This means making sure that all the loans or credit cards being compared have similar terms, fees and interest rates.
- Interest rates – The interest rate is an annual percentage rate (APR) that is charged on borrowed money. It’s typically expressed as a yearly rate and includes any fees or other charges associated with borrowing funds from a lender, such as a bank or financial institution.
- Fees – There can be many types of fees associated with getting a loan or opening a credit card account, such as application fees, origination fees and late payment penalties, among others; however, they are usually clearly outlined in writing, so there should be no surprises when it comes time for repayment!
- Terms – These include things like how much money you can borrow at once (the limit), how often payments must be made each month/year (the due date), what happens if one misses paying their bills on time (late fee).
Take advantage of the teaser interest rate.
When you apply for a loan or credit card, the lender will often offer an introductory rate that’s lower than what they’ll charge once the teaser period expires. This is called a teaser rate because it gives you a taste of what your payments would look like with that specific loan or card—and then it’s gone.
As an example, let’s say that Bank A offer an introductory interest rate of 5% on its credit cards (compared with its standard 13%). If you take advantage of this offer, your monthly payments will be $100 less than if you had opted not to do so; however, after six months pass and all those extra dollars are added up over time, they could add up enough for another vacation or two!
Know your credit score before applying for loans and credit cards.
Before you apply for any loans or credit cards, it’s important that you know your credit score. I have written a post regard the credit score earlier. Your credit score is a number that’s used to predict how likely you are to pay back a loan. The higher your score, the lower interest rate (and better terms) lenders will offer you on their products. Your credit report is used by lenders and creditors when deciding whether they should grant approval for loans and other types of financing; thus, knowing what’s in there before applying will help ensure that only qualified applicants receive approval from these companies.
To get a sense of whether your personal finances are currently in good shape—and what type of rates they might qualify for—it pays off big time if you can check out these two things first:
- How much debt do I have?
- What payments am I making consistently every month?
With that information in hand, it’s easier to get a sense of what rates you’re qualified for. Next, look at your credit report and see if there are any errors in it. If so, contact the bureaus responsible for these reports and ask them to correct them. The sooner they’re corrected, the better off you’ll be when applying for loans or credit cards in the future.
Step-by-Step Guide to Negotiating the Best Rates
The first step to negotiating a better rate on your loan or credit card is preparation and research. If you are going to negotiate, it’s important to understand how much you currently pay and what you could potentially lower that payment by.
Determine your needs and goals.
The first step in the negotiation process is determining what exactly you want out of this new rate. The more specific you can get, the easier it will be for the creditor to give you what you want because they know exactly what they have to offer.
For example, if you want lower monthly payments, then let them know that and ask for that specifically. If there are certain conditions that must be met for this negotiation to work (like an increase in interest rate), then let them know those as well so that they can make adjustments accordingly.
Gather information on current rates and offers.
Before negotiating anything with a creditor, it’s important to do some research about their current offerings and rates so that you have something to compare against when making a proposal of your own.
There are many websites out there dedicated solely to helping consumers find the best deals on loans and credit cards — just Google “best credit card offers” or “best loan rates” and you’ll find plenty.
Offering to switch to a different product or provider
If you’ve talked about the products or services they offer, and nothing has come up that’s better than what your friend already uses, then it’s time to bring up another subject. Ask if there are any other products or services they sell—such as a credit card with lower interest rates or loans with reduced fees.
You could try offering to switch from their loans to another company’s credit card, for example. Or you could offer to switch from their gas company to one that offers better rates. If they’re not interested in taking your business elsewhere, then there’s nothing more you can do — but remember that it doesn’t hurt to ask!
Documenting and confirming the agreement
Once you’ve agreed with the company, it’s important to get everything in writing. You can do this by sending them an email confirming your conversation or calling their customer service team—whichever works better for you.
6 Powerful Tips for Negotiating the Best Rates
Paying bills on time
Paying your bills on time is an important part of maintaining good credit. Late payments can hurt your credit score and make it more difficult for you to qualify for loans and credit cards in the future.
If you find you cannot pay your bills when they are due, contact the company as soon as possible and ask them if they can work with you on an alternate payment plan or provide other solutions (for example, extending the grace period).
If all else fails and there’s no way around missing a payment deadline, contact each creditor individually and explain why this happened—they may work with you!
Keeping credit card balances low
Credit card balances are a major factor in your credit score, so it’s important to keep them as low as possible. The lower your balance, the better!
The best way to do this is by paying off your bills each month in full. If you can’t pay off all of your balance, then try keeping it below 30% of your limit. Anything above that percentage could negatively impact your score by increasing interest charges and lowering available credit limits (which appear on reports).
Avoiding multiple hard inquiries
The best way to avoid multiple hard inquiries is to avoid applying for multiple credit cards at the same time. If you’re looking to get a loan, make sure it’s not from the same bank that issued your card. If you want both a loan and a credit card, try applying for them separately so they won’t show up on each other’s reports as having been applied for at the same time.
Another way of avoiding multiple hard inquiries is by using pre-screening services like Credit Karma or NerdWallet (which we recommend). These sites will check your credit score before submitting an application and give an estimate of what rate they would offer based on their analysis of your information—affecting nothing else!
Being polite and professional
Being polite and professional is always a good idea when negotiating. Remember that you are asking for something from the other person, so they have no reason to give it to you unless they feel like they will benefit from doing so. You have nothing on the line here—the other party does. That makes them more likely to negotiate with you (and maybe even give in).
You should also keep in mind that being polite does not mean being passive or weak-willed; it means being respectful and confident about what you want out of this situation. Be firm but polite when asking for things, being sure not to appear rude or aggressive—those types of behavior won’t help anyone get what they want!
Offering a realistic payment history and proof of income
You’ll also want to offer proof of a stable income and employment. If you’re in between jobs, show that you’ve been employed for at least three years and have been working steadily since then.
If you are self-employed, provide tax returns showing your income level over the past couple of years (or longer). If possible, include any invoices for services performed during those periods as well; these will help prove how much money was actually coming in during each year—and potentially how much more than usual might be expected from customers who owe enormous sums after being late on payments or defaulting altogether.
Asking for a lower interest rate or fee waiver
When negotiating for a lower interest rate or fee waiver, it’s important to be clear about what exactly you want. If you’re asking for a lower payment or interest rate, make sure that’s what you get!
The same goes for fee waivers: if someone at the bank tells you they’ll forgive one of your late payments and thus lower the total amount due each month by $50, but only if they can raise their annual percentage rate (APR) by 2%, don’t say yes! That would actually cost more than having paid all those extra fees originally in the first place!
Final Words
As you can see, it’s not that difficult to negotiate the best rates on loans and credit cards. All you need is some knowledge of how these companies operate and a little of courage. Once you have those two things, it’s time to go out there and make those deals happen!
