[-$48,446] Gaining and Losing Interest (Rates)

 

New Tool

I’d been using a certain website to track my accounts to get an aggregate view of most of my balances, but it recently shut down. 😦   However, I found another site and it’s great, much better even.  🙂  I can now track all of my accounts (spending and saving) in one place, and have everything automatically updated.  Definitely an upgrade.

Using this new tool and looking at my accounts made me start thinking about ways to make improvements. 💡  So I took action.

Raising My Rate: Savings Account

I moved my Emergency Fund to another financial institution offering a high interest savings account. As a result of this move, my E-fund account interest rate will increase from 0.01% to 1.7%. I don’t know why I didn’t look into this earlier. Ok, so 1.7% isn’t keeping up with inflation, but it’s a fair sight better than the near 0% I was getting before.

My Opportunity Fund will now serve as my overdraft savings account fund that is linked to my checking account. That makes sense to me and I like the idea of having my emergency fund ‘farther away’ so to speak in a different bank and not quite so easy to access (~2 day wait).

Gain: This move will give me $170 in yearly interest earnings (instead of ~$1).

Lowering My Rate: Refinancing Student Loan

Two years ago, I refinanced my federal student loans into private loans for a low variable interest rate of 3.42%. Today, my student loan interest rate is currently a variable 4.98% and going up seemingly every month now.  I’ve been hesitating about applying to other servicers because I really, really like the one I have. I have also been afraid because of the horror stories I’ve read about bad servicers out there (e.g. ‘accidentally’ losing payments which cause borrowers to rack up penalty fees and charges).  Sigh. But with no end in sight to rising rates, I knew I had to do something.

So I submitted a loan refinance application…to my current servicer.

I was curious to see what would happen. To my surprise I got a response, and a decision (‘Approved’), the next day. Blazing fast!

I didn’t even know I could re-refinance with my existing servicer. I was sure the application would be rejected outright. Why should they offer me a lower rate if I’m already paying a higher one, right? Well, I’ve learned a lesson. If you don’t ask, you don’t get.

I’m still not out of the woods, as I have to submit a few additional small pieces of info, but if all goes smoothly, my interest rate will decrease. They’ve offered me a fixed rate at 3.25% and a variable rate starting at 2.57%. I assume that my recent pay raise combined with my smaller loan balance improved my debt to income ratio significantly and qualified me for a lower rate. And best of all, I get to stay with my current servicer.  😀  😎

I’m in love with that 2.57% variable rate. It’s almost half of what I’m paying now, but as I’m writing this post I’m leaning toward getting the fixed rate and being done with it. I know I only plan to keep paying on this for another year and a half, but any number of things could happen in that time frame which could cause a delay to my final payment date. This would only lead to another interest rate re-maneuver in the future as LIBOR rates will likely be significantly higher 18 months from now. Thus, I think going with the fixed rate interest (3.25%) mitigates some of that risk for me.

‘Loss’: This move will save me about $40/mo in lower interest payments from my current 4.98% rate.

With my interest rate quickly approaching, and soon to blow past, 5%, I felt like I was racing the interest rate clock. Now with this re-refinance in the works, I can lock down my payment dollar amount and have one less thing to worry about going forward.

If this all works out (cross your fingers for me), I will be a big fan of my servicer. Seriously.

It feels good to be taking some action to keep tweaking my finances, no matter how big or small.

What are you doing / have you done to optimize your interest rates?


Punch of the Week

No left hooks or uppercut payments this week, sadly. Kick back with a cool beverage and stay tuned.

.

“Debtor’s prison is real, and opportunity cost is a bitch.” (DDSW Archives)

12 comments

  1. Maria · June 7

    That’s great news!

    Higher interest for your EF and (fingers crossed) both a lower interest rate and increased peace of mind when it comes to your student loan. And you get to keep your current servicer. Awesome!

    I’m wondering, if you go with the fixed rate, can you still pay off the loan as early as you want without any penalties (for lack of a better word)? Or will you, regardless of if you pay off the loan early, be on the hook for all the interest you would have paid had you stuck to the minimum payments and fixed rate?

    I hope what I’m trying to say is understandable. Heh. I know where I live having to pay ALL the interest if you have a fixed rate is often part of the deal, regardless if you can pay down the loan early.

    Do you know what you will do with the extra 40 a month? 🙂 Retirement, some extra breathing room for your spending allowance?

    Maria

    Like

    • Hi Maria,
      Hmmm. I don’t think so, but I’m not sure. I’ll have to ask about that. Good question.
      The extra $40/mo will probably end up going toward my spending allowance for the time being. I’d like for it to go back into the loans to take full advantage of the interest saved.

      Like

    • There are no prepayment penalties according to my contract. If I pay the total off early, I don’t have to pay the full 5 year interest amount. I only pay what has accrued up to that point. Interest accrues daily. I don’t have to pay it up front if that makes sense. So all around a good deal.

      Like

      • Maria · June 13

        That’s great news, and a good deal indeed! Thanks for letting me know. Fingers crossed everything go smoothly, if it’s not already a done deal. 🙂

        Like

  2. C@thesingledollar · June 7

    I have my cash savings in two Capital One 360 accounts right now. One is a normal savings account at 1% interest and the other is a Money Market account that pays 1.6% on balances over $10K. I moved a bunch of money over there at the beginning of January and, look, I’m not going to retire on $30/month in interest but as you say it beats the heck out of “nothing.” I appreciate small tweaks like that a lot.

    Like

    • Nice. I have to say, I’m not familiar with Money Market accounts. I always thought they were the same as CDs. I’ll keep those in mind for the future when I’m out of debt and building up my full Emergency fund.

      If you’re interested in moving, Marcus (Goldman Sachs) offers 1.7%. This is what I have. And I just saw that CIT bank is now offering 1.85%. I haven’t looked into them, though.

      It’s funny how it’s good to see interest rates going up (at least for savings accounts).

      Like

  3. czanclus · June 11

    Oh wow, had I known your savings were basically kept in a mattress, I would have pointed you in direction of several decent (and much improved since the sad 2009 days) e-savings accounts. I have not ‘maximized’ my interest per se myself, but I’d say, with the meager funds I have to work with, I came pretty close. You can obviously ~google~ this yourself, but Barclay’s bank’s savings rate is 1.65% annual, and Discover’s is 1.60%. I’ve had my $$ there for several years now, so for reasons similar to your attachment to the loan servicer, I preferred to stay their customer to chasing around fractions of percentages worth of rate improvements. That said, when I realized that Capital One couldn’t be bothered to follow suit with all the other interest rates rising, and kept dragging my savings at a measly 0.75% annual, I dropped them.

    Re loan financing servicer, I can tell you that Navient absolutely sucks, but that I’m sticking with them till the bitter end (Aug 2022 projected payoff date), as my interest rates have been locked at 2.75% since the saga began (federal loans from the early 00’s…). Good call on the slightly higher fixed than the variable, and great that your current servicer honored your request.

    No upper cuts this week, but the godzilla loan better watch out next week! Keep truckin’.

    Like

    • 🙂 Yeah, my emergency fund was basically in a mattress. It’s been taken care of for now. My new savings account offers 1.7%.

      Student loan servicer: Yeah, you have a great rate. No need to rock the boat if they aren’t being too much of a pain.

      Yeah! I’m so happy to be able to stay with the servicer I have now. They’ve given me 0 problems and are so flexible with when they get their payments.

      Like

  4. Michelle · June 15

    Great job on moving your savings account to a place with a better rate! I need to do the same, right now I am getting 1%, but have looked into a couple of other online banks offering around what you found. I figure any extra money helps, no matter how small.

    Like

    • Good! Yeah, I was shocked once I finally looked and saw how low my interest rate was on my (Emergency Fund) savings account. $170/year vs $7? Yes, please!

      Like

  5. zeejaythorne · June 23

    I also had no idea you could refinance within the same company. Good on you for tackling the debt so well that they were willing to give you a better deal!

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s