How can I lower my interest rates on my credit card and mortgage?

October 8, 2008 5:54 PM

How can I lower my interest rates on my credit card and mortgage?

Greeting and salutations fellow MeFites,

Is it likely, possible, or wise to try to persuade my creditors (credit cards and mortgage company) to lower my interest rates by just asking them nicely. I hope this questions doesn't sound too naive or foolish, so please save the lecturing:)

First some background. I have a pretty decent amount of debt. Roughly about 23K in debt, all with 16% apr and up, on 5 different cards...(I know, I know!) My mortgage is 209K with a 5.99% 30 year fixed. I rent out one side to a tenant and live in the other side. My income has ranged from 65- 45K in the last three years. This year, however doesn't looks so good. And with all of this economic turmoil it doesn't look better for the near term. Or the far term for that matter!

I work in the commercial construction field and needless to say, things have been drying up as of late. Work is pretty slow, but It has given me the opportunity to peruse training in another line of work that will hopefully turn out to be more lucrative in the long run. However, in the short term, I have not been this broke in years! I pretty much have used up any saving that I had this year because of lack of work and the remodeling my house/duplex.

How likely is it that my credit card companies will lower my interest rates If I just ask. I have only been more than 30 days late on 1 credit card in the last 7 years, and that was three years ago. Not that it matters, but it wasn't that I couldn't pay it I just made a mistake on an automatic payment option. I have missed the occasional due date now and then, but the payment is never more that a few days past due.

Any advice on how I should go about to do this with my credit card companies? Has anyone convinced their CC companies to work with them without being bankrupt or something? If so, what tactics have worked for you?

Also, Is it likely, or even at all possible that I get my mortgage company to lower my interest rates WITHOUT having to refinance my loan. I have never been late with a payment with my mortgage since I bought my duplex two years ago. As I have said, I have a 30 year fixed at 5.99.

Now having said that, I imagine that my credit score isn't great because of my debt load. Any ideas about how to go about getting my interest rates lowered on. I'm not above begging, btw. What ever works!

Thanks,

Anonymous. AKA, Ol' Debtty Bastard

p.s. I dont know if this info will help but, my mortgage pmt is 1791.00 and all of my card totally to about 580.00 a month.

posted by anonymous to Work & Money (8 answers total)

Yes, it is possible. My debt was similar to yours in amount and interest rate (on at least one card, my APR was 24% because I accidentally missed a payment), and a debt management lawyer was able to get my APR down to an average of less than 8%. Of course, not spending any more money on those credit cards was a natural part of the deal, as well as the lawyer's fees. Two years later, with my parents' invaluable help, my debt's more than half paid off and my credit score is through the roof despite my almost non-existent income.
posted by halogen at 6:41 PM on October 8, 2008

Oh, I wasn't bankrupt and had never missed a minimum payment because I lacked the money. I just wanted to be rid of my debt.
posted by halogen at 6:42 PM on October 8, 2008

Is there a NACA office in your area? They can help you re-finance through a program called HomeSave.

http://www.naca.com/refinance/refinanceTenStep.jsp
posted by Riverine at 6:48 PM on October 8, 2008

I don't think that (given the current climate) you're going to reduce your interest rates on anything simply by asking. Although it's always worth asking if there's a better product / deal available that you could transfer to. I don't know how it works in the US, so even if that fails no harm in trying for a straight reduction, right? Just remember that the first person you speak to will almost definitely not be able to do it, so you'll need to escalate the call until you get to someone who has the authority to do it - so be really nice to everyone you speak to on the way up! You won't lose anything by asking.

Having said that, if you're really at breaking point (i.e. can't afford the next payment or have even missed a few payments) then most reasonable creditors should be happy to negotiate a payment plan, if not an amended interest rate (better a revised payment plan than no money at all, from their point of view...)

It doesn't sound like you're there yet, so there are still things you can do to try and sure things up.

Credit card rates are usually higher than standard bank loans - if you took out a bank loan to pay off your credit card debt, you'd be paying less interest (even if your credit rating isn't great, interest on loans will be less). Otherwise, concentrate on paying off the credit card with the highest interest rate first.
posted by finding.perdita at 6:57 PM on October 8, 2008

As it happens, this is an excellent time to, yes, just ask your lender about what is called a "workout". It's the simplest kind of mortgage readjustment and does not (necessarily) involve refinancing with a new mortgage and closing costs.

Lenders are under intense pressure right now and if they foreclose on you they will not receive any money and they may be stuck with a property that will not sell for months. They have also been given federal incentives that mitigate some of their costs and are intended to encourage workouts that keep homeowners in homes and banks in business.

There are a number of NPOs that will act as advisors/brokers with your lender to help you out. Some of their terms differ (e.g. your rental property may disqualify you). If you trust your lender and you are generally knowledgeable you can probably do this on your own, though (maybe have a lawyer double-check stuff for you) -- lots of people do.

Hope Now -- banking industry initiative begun last year at behest of Congress
Homeownership Preservation Foundation
NACA Home Save

FHA Hope fro Homeowners program

As for your consumer debt, just call up and ask. There are scripts on the internet that boil it down to "I want a lower rate. If I do not get one I am prepared to switch to another card." The APR reductions are often surprisingly large. I don't know how well this tactic might work in the 2008-09 restricted credit markets but it can't hurt to try. At least you can find out if they have a reason for objecting ("you were late less than six months ago") that you can fix.

Find out your credit score at MyFICO.com.

(I began researching this for my parents last night.)
posted by dhartung at 11:55 PM on October 8, 2008 [2 favorites]

With the credit cards, it is indeed possible to just call and ask for a lower rate -- at least it's not unheard of. You may run into them just saying "no," however, for whatever reason -- if you've been late on a payment, they may turn you down. But if you have good credit, you can just get another card -- this site has a good list of different types of cards, breaking them down by who has the best rates, best rewards points, etc., and it also links straight to each card's application.

Again, getting another card and transferring the balance is your best move if you have good credit but the card company still isn't lowering the rate. I had a card whose rate shot up to 19% just because they wanted to, and they wouldn't lower it -- and I have super-boffo credit, so I went to that site, found a card with a rate of only 6%, applied and just transferred the entire balance of that 19% card to the 6% card.
posted by EmpressCallipygos at 4:52 AM on October 9, 2008

I called B of A, politely explained that I was working on my finances, and asked them to lower my rate. I explained that I knew I had late payments, and was resolving the problem by embracing online bill-paying. I was prepared to say I was going to get a better rate from another company, but did not have to. Just call them. If one rep says No, call again later.
posted by theora55 at 9:31 AM on October 9, 2008

A few people have mentioned NACA...unfortunately, NACA will not be able to help in your situation, as the Home Save program is only for unaffordable mortgages (which they define as an interest rate above 10 percent, I believe). A 30-year fixed at 5.99 percent is actually better than what they could do for you (their current interest rate is 6.25%).
posted by feathermeat at 4:27 PM on October 9, 2008