Consumer Comeback Blog

Everything is negotiable – how to negotiate interest rates

A wise (and well to do) former boss once told me EVERYTHING is negotiable. He said, “You may run into stubbornness from time to time, but if you don’t try, you’ll never know.” I’ve lived my life that way ever since. And one way in which it has helped me immensely is with my own personal finances: by negotiating interest rates.

Negotiate mortgage interest rates

Mortgages are difficult to come by these days. It’s essentially a requirement to have enough cash to put 20% as a down payment, and even then, you must have a credible source of income and impeccable credit. But this is all the more reason to expect to get an extremely low interest rate. And low rates there are. Historically low.

Your mortgage broker will probably tell you how lucky you are to get such a low rate, if you are approved. But don’t let that fool you. Push back and see how low it will go.

For current homeowners, because rates are super low, and a number of people are stuck with underwater mortgages, refinancing and re-negotiating a lower rate might be one of the only things for them to get afloat again. There are even special programs for those who are having trouble keeping up with their mortgage payments. Some of these programs even come with a principal reduction, but perhaps more importantly, interest rates are generally reduced.

But even if you don’t qualify for relief programs, it may still be the perfect time for current homeowners to look into refinancing their mortgages. A lower interest rate can save thousands of dollars over the course of the loan.

Negotiate credit card rates

Credit card companies are having trouble keeping customers. With the recession, consumers are focused on paying off debt and are consequently cutting up their credit cards. As a result, competition beefs up, and that means consumers win. Whether you have amassed credit card debt or simply use your card for rewards, now is a great time to re-negotiate your terms.

Especially for those with a regular balance and are attempting to pay down their debt, the single best thing you can do is re-negotiate interest rates. Even a 2% reduction of your interest rate can save a bunch of cash and/or help pay it off quicker. One way you can gain leverage is to tell a customer service rep that you are thinking about doing a balance transfer because another company offered a promotional rate of 0% for 6 months on balance transfers. This works nearly every time.

Negotiate student loan rates

While nearly all interest rates are falling due to a slow economy, student loan rates are skyrocketing out of control. A projected 7.5% interest rate will cost a lot of current college students a lot of money over the next 30 years (or more). High rates like this also mean high monthly payments, increasing the risk of default. And although now might not be the best time to negotiate for a lower rate, there are a number of options for graduates who are currently or about to start making payments.

Loan consolidation programs are a great way to reduce your overall interest rate. Both federal (for certain qualifying loans) and private programs exist. Initially, your consolidation interest rate will be a composite average of the rates/amounts of the loans you’re currently paying (or there about). Don’t be satisfied with this initial offer. But instead of saying you want to lower your monthly payments (they may offer a graduated payment plan instead of interest reduction) tell them you are looking for a way to pay the loan of quicker, without raising your monthly payments.

Another option for those struggling with their monthly payments is loan modification. With high interest rates, higher monthly payments makes it more difficult to pay back. It’s a viscous cycle. But if you can prove that this is the case for you, and that a lower rate you would enable you to make consistent payments, you might qualify for a loan modification.

Negotiate car loan interest rates

One of the ways dealerships try to get customers into their doors is by offering incredibly low financing options for “qualified customers” – sometimes 0%. And if you happen to qualify for this promotional rate, you might have little negotiating left to do. But if you don’t initially qualify, you suddenly have a reason to walk right out the door. And you can use that to your advantage.

Salespeople want the sale. They’re not going to give the car away, but in the end they know it’s better to negotiate a bit than to let you walk away. Also, commission based salespeople know they earn less if they sell the car for less. That means they might be more willing to negotiate a lower interest rate than drop the price of the car if they know it will convince you to make the purchase. But even if they aren’t able to get you a better interest rate (if you have credit problems, etc.), you might be able to then use the higher rate garner sympathy and negotiate a lower purchase price. It’s certainly worth a shot.

Tips on how to negotiate

I’m not going to claim to be any professional negotiation expert, but there are a few things that can help you gain an upper hand:

  • Do your research – know the market rates/prices. Comparison shop before you negotiate.
  • Have an out & be ready to walk away – I seriously can’t stress this enough
  • Focus the conversation on your personal situation – market rates aside, you simply can’t afford your current offer/rate. Lowering it would help out greatly. Get them to sympathize.
  • Don’t accept no for an answer
  • Be overly polite
  • More tips here