A person with significant outstanding debt can benefit from learning about the many ways in which he can lower this debt to create some breathing room and financial relief. Options range from restructuring debt so that repayment is more manageable to paying back only a portion of the debt in an arrangement with creditors. All methods have their advantages and disadvantages.
Paying Off Debt
The easiest way to lower debt is to pay it off. A person seeking to pay off debt would do best to pay off the debts that are accumulating punitive interest rates and late fees first, as these are the debts that are costing him the most money. After that, the person should attempt to pay off what he can without getting himself into a financial situation in which he will miss payments and incur additional fees.
Restructuring Debt
If a person can't pay off debt, he may be able to modify it so that he can pay it off over a different time frame and at a different rate of interest. Some creditors, aware that a borrower is having difficulty meeting his payments, are willing to change the debt's terms so that the person pays off the loan over a longer time frame, but in smaller-sized payments. In addition, some creditors will drop interest rates if borrowers can't meet them.
Consolidating Debt
Sometimes, debt consolidation -- combining multiple debts into one big debt -- can make sense for a debtor. Debt consolidation can be provided by a finance company that is willing to pay off each of a person's debts and, in exchange, provide the debtor with a new, bigger loan. This may actually cost the person more in the long run, as the consolidator may charge a fee, but, like a restructuring, it can reduce the debt payment size.
Settling Debt
Some debtors, particularly those with very large debts, may be forced to attempt to settle with the creditors so that the creditors agree to accept only partial payment for the debt. While many creditors insist on being paid every penny, others prefer to take what they can get rather than spend more time and money on collecting the full debt. However, settling a debt can harm a credit score.
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