interest rate negotiation
Calling creditors to request a lower interest rate on existing debt — often effective for customers with good payment history.
Example
“Interest rate negotiation reduced her credit card rate from 22% to 14% with a single phone call.”
Memory Tip
CALL AND ASK — good payment history is leverage. Most issuers will negotiate.
Why It Matters
Interest rate negotiation directly impacts how much money you pay over the life of a loan. Even a small reduction in your interest rate can save hundreds or thousands of dollars, making it a worthwhile effort for anyone carrying debt.
Common Misconception
Many people believe that interest rates are fixed and cannot be changed once a loan is established. In reality, creditors often have flexibility and may be willing to negotiate, especially if you demonstrate financial responsibility.
In Practice
A person with a credit card balance of 5000 dollars at 18 percent APR might call their credit card company and request a rate reduction to 12 percent based on their perfect payment history over two years. This change would reduce annual interest charges from 900 dollars to 600 dollars, saving 300 dollars per year without paying down any principal.
Etymology
Modern debt management strategy — leveraging relationship to reduce borrowing cost.
Common Misspellings
Compare debt consolidation options
Related Terms
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