3 Tips for Renegotiating Your Interest Rate on a Current Account
As someone who has done this several times over the years, I can tell you that renegotiating interest on a current account isn’t as tricky as you might think. You just need to know how to ask. Here are three effective tips:
1. Build a Persuasive Argument
No lender is going to magically give you a lower interest rate just because you ask for it. Before you make an appointment, figure out what you can bring to the table. Here are some factors that work in your favor:
Improved credit rating: If you took out a loan years ago with an average credit score, and now you have excellent credit, lenders may agree to renegotiate your interest rate. After all, banks like to have clients with great credit. This is one reason I always tell people to remember their free yearly credit check.
Better offers from competitors: Shopping around with competing credit agencies can work surprisingly well, especially if you have excellent credit. If you can show several offers with lower interest rates from other lenders when you go to your appointment, it gives you leverage for renegotiating.
Great rates for new customers: Don’t hesitate to take advantage of your bank’s marketing strategies. If you see that the bank has lowered its advertised interest rates significantly for new customers, request the same treatment as a long-time client. This applies to credit card debt, mortgages, small business loans and other financing.
Additional banking accounts: Business owners often have several types of financing with the same bank, including lines of credit, equipment leases, checking accounts and savings accounts. These accounts add extra weight to your request for renegotiating credit rates. After all, if the bank says no, they risk losing, not just one loan, but all of the business you do with them.
Any request to renegotiate interest rates is more effective when you have a history of making payments on time. As a valued, trusted customer, you have more leverage.
2. Be Specific
Look at the difference in these two imaginary conversations and tell me which person you think is more knowledgeable about financial matters:
“I have good credit, and I wanted to see if it’s possible to get a lower interest rate on my loan.”
“My credit rating has gone from 670 to 820, and I’d like to talk about lowering my loan’s interest rate from 6% to 4%.
Even if both customers have excellent credit, B is more persuasive thanks to mentioning specifics. As you can see, there’s no need to use complex terms. What’s important is to know exactly what you want and talk about it with concrete figures.
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3. Check the Fine Print
Depending on the original loan terms, renegotiating isn’t always worth it. Some banks (though not all of them) have prepayment penalties. These high fees are designed to lock you into the original terms or risk paying a large penalty. Before moving forward, ask about any applicable fees so you know what to expect.
In a way, your appointment to renegotiate interest is similar to a job interview. Having the right documents helps, but a big part of the decision comes down to how convincing you are. You need to come off as a person who is respectful, friendly and experienced in financial matters. Put these tips to work for you and save a lot of money on your interest!