How to Reduce Debt Payments

Monthly debt payments can take a huge chunk of your income, leaving you financially strapped each month. Getting rid of debt will not only improve your financial footing but also improve your credit score--lowering the cost of borrowing. Unfortunately, eliminating debt from credit cards and other loans is easier said than done. Even so, there are practical and effective ways to lower your debt payments and save money each month. The key is knowing how to negotiate and how to manage your finances better.

Instructions

1

Create a plan. Retrieve credit card statements and other loan balances and calculate your debt. Subtract monthly expenses from your income to identify your extra income. Establish a debt elimination plan and set a realistic pay off date. For example, you can pay off a $2,400 credit card balance in one year by paying $200 a month.

2

Communicate with creditors. If unable to afford your monthly debt payments, call you creditors and ask for a lower monthly payment. Student loan lenders often adjust payments to accommodate debtors, and several mortgage companies offer loan modifications to assist distressed borrowers.

3

Lower your interest rates. According to The Motley Fool.com, you can negotiate a lower interest rate on your existing credit cards by suggesting that you will have to cancel your card and transfer your balance to a a credit card with a lower interest rate. Don't by shy about mentioning the rate you would be willing to accept. Decreasing the rate results in lower minimum payments and will also allow you to put more toward principal.

4

Transfer your credit card balances. Research credit card offers and apply for a low-rate credit card. Transfer your high-interest balances to the new card to save money each month. Be aware that applying for a new credit card places an inquiry on your credit report and may reduce your score by a few points.

5

Consider bill consolidation. Use personal property as collateral and apply for a secured debt consolidation loan or a home equity loan to combine your high interest debts. These loans typically offer lower interest rates, which lowers your monthly debt payments.

6

Increase your income and/or cut back on expenses. Temporarily seek second employment or cut back on unnecessary expenses to increase disposable income and pay off debts completely. Activities and expenses to cut out include eating out, shopping, vacations, cable services or any other expense you can forgo.

7

Refinance loans. Consider a mortgage or auto loan refinance to extend your loan term and reduce monthly payments.

8

Reduce credit card use. Remove credit cards from your wallet and place them in a lock box or ask a trusted relative to hang onto the cards for you. Use cash to avoid new charges and only use credit cards for absolute emergencies.