High interest rates can be a problem for people who have significant student loan debt or large credit card balances. In some instances, paying interest is simply unavoidable when you’ve already incurred high debt. However, some strategic financial management may make it possible to spend less on interest and get your balances paid down faster.
Keep Your Credit Strong
Simply having debt doesn’t mean that you’re going to have a weak credit score. In fact, it’s those outstanding obligations that you make payments on that are the basis for your credit. However, you need to keep up with payments in order for the debt to result in a positive credit score. Be sure to do a credit check on yourself periodically to monitor how your payments are affecting it. Review the full report to check for discrepancies. Credit maintenance will help you get low interest rates on any new lines of credit that you take out and may also position you to request changes to current credit agreements.
Ask for an Interest Rate Reduction
A stable payment history to a financial institution or student loan administrator may make you eligible for a rate reduction. Believe it or not, simply calling up and asking could help you get a better interest rate. Lenders and credit card companies know that they have to compete with other companies to keep your business.
If a lender or credit card company is unwilling to negotiate a lower interest rate, you may want to consider taking your business elsewhere. Consolidating debt may be a way to pay less interest over time. Bear in mind that it may entail making higher monthly payments. Consolidating credit card debt to lower payments may result in higher interest rates, so you have to be attentive to the total amount that you will be paying within the full term of any consolidation agreement. A good time to think about consolidation is when interest rates are low and lenders have confidence that rates will not rise soon.
Prioritize Payments High Interest Balances
When you are making payments towards outstanding balances, be sure that you are making your decision about which to pay down first based on which has the highest interest rate. Making your decision based on the balance alone could end up costing you more. If a considerable portion of your monthly spending goes towards paying interest on previous expenditures, it can be a really onerous strain on your budget.
Paying for the things that you’ve already bought while you still need to buy new things is bad enough. Paying an excessive amount in interest for those purchases is more than a little irksome. Having to spend just about as much on interest as you do on whittling down your principal can make it very tough to get that principal balance down.
Taking steps to address the problem of high interest payments can result in considerable savings that enable you to pay less towards your debts and afford more of the things that you want or need.