Your house. Your vehicle. Student loans. Furniture. Perhaps a vacation home and a boat. Credit card balances.
Think for a moment about everything that you finance over the course of a lifetime. It’s a lot, yet the expense that you incur for many of these belongings is essential to you living your life. And another common denominator between all of these aforementioned expenses is interest fees.
As you know, because many people don’t have cash on hand to pay for a home or car upfront, they finance these purchases so they can better manage how they pay for them over time. And that’s where interest fees come into play. They’re the necessary evil for financing larger purchases – and according to a recent study by Self, it’s estimated that the average American is likely to pay about $130,000 just in interest fees over the course of their lifetime.
Needless to say, but that’s an awful lot of money that could be saved, invested or spent elsewhere. Wouldn’t you love to have an extra $130,000 lying around?
Now, interest fees themselves are largely unavoidable. However, that’s not to say there aren’t ways to significantly reduce what you pay on a loan and over your lifetime. And with interest rates today still at record lows, now’s a great time to take advantage of some of the opportunities that are out there to lower your rates and save money.
How to Decrease Interest Spend
So just how can you decrease what you spend on interest? Here’s a look:
- Refinance large purchases: Whether it’s a vehicle or a home, it makes sense to shop lenders and see if you can nab a lower interest rate than what you pay now. With interest rates hovering at or around the 3 percent mark for 30-year mortgages, it could represent an ideal time to see how much lower you can get that interest rate compared to what you’re paying now. Use an interest rate and mortgage calculator to find out.
- Prioritize debt with the highest rates: More likely than not, this is going to be your credit card debt, which has an average interest rate of about 18 percent. This is also characterized as revolving debt, which doesn’t have a pre-determined repayment period. The bottom line is that if you aren’t in the habit of paying off your credit cards each month, your debt can snowball – and have you paying big in interest in the long term.
- Improve your credit score: Those with good credit are likely to qualify for loans with lower interest rates compared to those with poor credit. Hence, making it an effort to improve your FICO score can have a significant impact on what you pay in interest.