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Negotiate Lower Interest Rates While Paying Off Debt

By Jordann Brown on June 29, 2020 No Comments
woman on phone, negotiating debt, bills

Knowing how to successfully negotiate lower interest rates on your debt is an assett. Paying off debt can be difficult. It often requires months of persistence, making payments on time, strict budgeting, and frugality. It’s not a fun experience, which is why so few Canadians are debt free. If having better personal finance is one of your goals, learning to negotiate lower interest rates is an invaluable tool.

If you don’t like the idea of living frugally while paying off debt, look into ways to pay it off faster. Most of the time, this entails sending more money towards your debt, but there is another way to speed up your debt repayment, and that’s by lowering the credit card interest rates on your debt.

By lowering your interest rates, you’ll spend less money paying your creditors and more money reducing your loan principal, which is what brings you closer to financial freedom.

Rookie negotiators aren’t always successful when requesting lower interest rates, according to a survey by the U.S. Public Interest Research Group. About half of the surveyed consumers who requested lower interest rates were successful, and their average rate reduction was about 5.53%.

So, if you want to negotiate lower interest rates on your debt, you should prepare yourself. Do your research on negotiation best practices to maximize your chances of success. We’ve compiled five key steps below to help you succeed in your interest rate negotiations so you can start paying off debt.

Step 1: Do your homework

The first step towards a successful interest rate negotiation is to arm yourself with information. Research what other balance transfer offers are available from competing lenders. Research different options for your debt like lines of credit, low-interest credit cards, or balance transfer credit cards. If you are carrying your debt, call different credit card issuers to see if they can offer you a lower rate.

It’s important to note here that you shouldn’t let them make a hard inquiry into your credit score, which will negatively affect your credit score temporarily. Simply ask the lender for preliminary rates. If you find a provider offering a particularly good rate, ask for that information to be emailed to you in case you decide to move your debt there later.

Step 2: Negotiate before paying off debt

Once you’ve armed yourself with research, you’ll know what a reasonable interest rate reduction is for your particular debt tool. Use this information to come up with a realistic ask. Maybe it’s a few percentage points on your line of credit or five or more percentage points on your credit card. Whatever it is, have a number in mind, and be prepared to ask for it.

Step 3: Start with your oldest credit card

Leverage your loyalty to your credit card provider by negotiating interest rates on your oldest credit card first. Emphasize that you’ve been with them for years, and you just want a temporary reduction in your interest rates to get your debt under control. Leverage your credit history the credit card companies. with Don’t be afraid to mention competitors’ rates to see if that will motivate them to give you a lower rate. Now, prepare for calling your credit card company.

Step 4: Make the call

Making the actual call to lower your interest rate can be an uncomfortable experience. To maximize your chances of success, make sure to practice beforehand. Be direct and honest about what you want. Explain that you are a loyal customer, you are trying to get your debt under control, and you’d like a temporary reduction in your interest rate.

Explain that you’ve research different options and state what you feel is a reasonable reduction. Be direct with your request. Research common negotiating tactics and practice them beforehand. Pushy people don’t get anywhere with customer service representatives. Explain that you are paying off debt and ask if you have any options.

Step 5: Follow through on your threat

Sometimes negotiating doesn’t work, or it doesn’t work well enough. You might get the interest rate reduction you asked for, but it’s not as low as a competitor’s rates. In this case, follow through and move your debt to a lower interest rate product. Whether you move your debt to a lower interest credit card, a line of credit, or a balance transfer credit card, it’s important to get the lowest possible interest rate on your debt. Saving even just a few percentage points in interest on your debt can save you hundreds of dollares.

Negotiating a lower interest rate on your debt is a great way to speed up the debt repayment process. It puts more money towards the loan principal, instead of interest. If you follow the steps above, there’s a good chance you’ll be successful.

Final Thoughts

When you negotiate lower interest rates, it allows you to pay down debts faster. Ultimately, this can help you go from a poor rate on your credit report to good credit standing. Furthermore, it can increase your credit limit and ability to make major purchases in the future. If you aren’t prepared to negotiate, perhaps credit counselling is a good option for you. Contact us today to learn more about your options.

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Jordann Brown


Jordann Brown is a freelance writer and marketer living in Halifax, Nova Scotia. She paid off $38,000 in two years by living on a budget in a 400 square foot cottage. You can find her blog at my-alternate-life.com.

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