Today, many Americans are carrying debts across a number of accounts and loan types, and their balances can sometimes grow as a result of significant interest rates. Fortunately, there are a number of ways consumers can reduce these charges.
When consumers have large interest rates on their various loan types, they can often pay more into their added charges as a result of those APRs than they do into their principals, according to a report from Kiplinger’s Money Power. Therefore, it can be a good idea for consumers to look into ways to reduce the interest rates they pay on their accounts.
One of the easiest ways to do this for credit cards can be to call up a lender and ask, the report said. Consumers with strong borrowing histories who may find themselves a little overburdened by their current rates can have some success with this method, particularly if they are persistent about doing so. But if they aren’t, it may be a good idea to find a balance transfer credit card that will allow them to move their debt to a new account that provides them with a 0 percent introductory rate for the first six to 18 months they have the new card.
Of course, there is also the popular option of refinancing a home loan, the report said. This can be a bit of an arduous and complicated process, but the result for those who are successful in their attempt is extremely beneficial. A refinance can save consumers hundreds of dollars per month or more on their monthly mortgage bills, and reduce the interest rate on their remaining balance by a few percentage points, saving them more in the long-run as well.
And a less well-known type of refinance comes in the form of auto loans, the report said. As with mortgage refinances, seeking this for an auto loan can significantly reduce both the amount a driver pays per month and the interest rate that balance carries. However, many auto financing lenders have penalties built into their loan agreements for consumers who pay off their balance early, which might be costly for those looking to refinance.
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Another great way consumers can get out from under their debt is by increasing the value of their monthly payments so that they eliminate their balances more quickly.
Image: 401k, via Flickr