It will certainly be more difficult to negotiate a lower interest rate on your debt now than it was just a year ago. But it may still be possible. The easiest way to lower your overall interest expense is to replace your unsecured debt with secured. Lenders generally charge lower interest when there is adequate collateral against the loan. One of the ways to do it is through a Home Equity Line of Credit (HELOC) which has become very popular in the recent years.

Another way to reduce the interest you are paying is to make it tax deductible. For example, if you have a $1,000,000 mortgage on your home and own a $1,000,000 investment portfolio, you can sell the portfolio, use the money to pay off your mortgage, and then borrow $1,000,000 again to re-purchase your portfolio. If you are paying a 5% interest on your mortgage and your marginal tax rate if 40%, this transaction will reduce your interest expense from $50,000 to $30,000 a year, which translates into 3%. You will still have your house and your investment portfolio, but you will be saving $20,000 of interest expenses per year.

But if you don’t have any assets to put up as collateral or any investment to liquidate, you may still be able to reduce your interest expenses by either finding a new lender or convincing your current one that you are a good borrower and loosing you is not in their best interests. First, you need to improve your credit rating. In addition to the basic discipline and making your payments on time, there are few tricks that can make you look better. It is important to remember that your debt should not exceed 75% of your credit limit. That applies to each debt individually, rather than your total debt load. Therefore, if you have several loans and some of them are close to being maxed out while others are way below the limit, your rating will increase if you re-shuffle your loans and make them all look small enough. But try to avoid getting too many loans. You can also improve your rating by simply paying off some of your debt and thereby reducing your total debt service ratio.

One more advice, try to pay off your high interest debts first and low interest last. And the best advice, of course, is to stay away from debt if possible, unless it is a part of some creative financial strategy, such as a leveraged investment.

Nikolay Sisan is a Certified Financial Planner and freelance writer in Vancouver.