Cut your own interest rates

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Not getting any help from the government to improve your financial situation? Use these tips to make your money go further.


Contrary to widespread perception, changes to the federal funds rate do not have a direct impact on mortgage rates. So it’s a mistake to use federal funds rate decisions as a gauge for the likely direction of mortgage rates.

The best way to cut your mortgage rate is to refinance your mortgage. Although rates have increased significantly in recent weeks, they remain low by historical standards.

If you have an adjustable-rate mortgage and it is about to adjust soon, you typically can lower your monthly payment by making an extra principal payment before your mortgage is recalculated. Talk to your lender about this option.

Finally, the federal government’s Making Home Affordable program may help cut your home loan costs if you qualify for mortgage help.

You can compare mortgage rates using Bankrate’s search tool.

— Chris Kissell

Home equity

If you already have a home equity line of credit, or HELOC, it will be difficult to trim borrowing costs further. Most HELOC rates are tied to the prime rate, which in turn moves in lock step with the federal funds rate. Because the federal funds rate is near zero, HELOC rates are likely at or near their lows for the foreseeable future.

For many homeowners, HELOC borrowing expenses are tax-deductible, making them an even bigger bargain right now.

Most home equity loans have fixed rates, so there isn’t much you can do to lower your rate on an existing loan.

If you are shopping for a HELOC or a home equity loan, the best way to cut your rate is to improve your credit score. Lenders typically offer the best rates to borrowers with top credit scores.

Falling property values have made it much tougher to find home equity products. Homeowners who can’t find a willing home equity lender may want to consider shopping for a personal line of credit.

You can compare home equity rates using Bankrate’s search tool.

— Chris Kissell


Occasionally, you’ll find a bank willing to negotiate a CD rate with a customer. It usually requires a trip to the bank and a substantial deposit or hefty account balance. Sometimes a better CD rate will accompany a personal loan. But that’s the hard way to get a better rate.

You’re much better off shopping for high-yield CDs. You’ll find rates that are significantly better than standard rates. For instance, as of this writing, while the standard yield on a one-year CD is 1.19 percent, the Bankrate high-yield tables are showing one-year CDs with yields from 1.35 percent to 2.35 percent.

You can also try building a CD ladder, which will enable you to take advantage of longer-term rates, presumably the high end of the yield curve, on a routine basis.

You can compare CD yields using Bankrate’s search tool.
— Laura Bruce

Auto loans

Auto loans have been extremely affordable for car buyers with good or great credit since the December 2008 Federal Open Market Committee meeting when the intended federal funds rate was lowered to zero.

But to qualify for the best rates, borrowers need a FICO score well above 700.

If you plan on shopping for a car loan in the near future, save yourself some money by beginning to clean up your credit.

Start by checking credit reports and disputing any inaccuracies therein. Pay down debt and always pay your bills on time. Any black marks, especially recent ones, will cost you money.

Second, bring a large down payment to the table and don’t be tempted by long-term loans. Get the shortest-term loan you can manage. Longer-term loans are more expensive over time and can trick you into buying more car than you can comfortably afford.

For car owners looking to save some money, auto loan refinancing is available. For owners upside down on their loan or owing more than the car is worth, getting the loan refinanced will probably not be possible.

But for owners who owe less than the car is worth and want a better interest rate, refinancing is a fairly straightforward process, though some minor fees may be involved, for instance to transfer the lien holder.

Before refinancing, check your current loan to see if there is a prepayment penalty, as that could end up costing more money than the refinance would be worth, depending on your interest rates.

A final caveat: Drivers of cars less than 3 years old have the best chance of successfully scoring a lower interest rate through a refinance.

You can compare auto loan rates using Bankrate’s search tool.
— Sheyna Steiner

Credit cards

As a group, credit card issuers aren’t dropping interest rates as a result of the low U.S. prime rate. Soaring loss rates have cut into their profits and many have increased APRs ahead of regulatory changes that will make it more difficult to increase rates on existing balances.

Asking for a lower rate may not work out in the consumer’s favor, either.

“A cardholder’s call to insist on a lower rate could prompt the issuer to instead raise the rate if they find out something unfavorable about the cardholder — or even if they don’t,” says Greg McBride, senior financial analyst for

He says the safest situation is one where you have a strong credit score and a backup card to which you could transfer the balance if the negotiation backfires.

You can compare credit card rates using Bankrate’s search tool.
— Leslie McFadden

If you’re dealing with other money problems, Bankrate can help. Read “How to solve 5 money problems.”

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