Budgeting Managing Your Debt 5 Ways to Reduce Your Monthly Debt Payments By LaToya Irby LaToya Irby Facebook Twitter LaToya Irby is a credit expert who has been covering credit and debt management for The Balance for more than a dozen years. She's been quoted in USA Today, The Chicago Tribune, and the Associated Press, and her work has been cited in several books. learn about our editorial policies Updated on December 28, 2021 Reviewed by Somer G. Anderson Reviewed by Somer G. Anderson Somer G. Anderson is CPA, doctor of accounting, and an accounting and finance professor who has been working in the accounting and finance industries for more than 20 years. Her expertise covers a wide range of accounting, corporate finance, taxes, lending, and personal finance areas. learn about our financial review board Photo: Erik Isakson/Getty Images Consumer debt levels are at all-time highs. In the fourth quarter of 2019, overall consumer debt reached $4.19 trillion while unpaid revolving debt—largely credit card and personal loan debt—surpassed $1.09 trillion. Properly managing your debt level is one of the keys to financial success. Whether you are a multi-million dollar professional or a blue-collar worker, successful debt management is your path to financial freedom. If you are struggling to maintain or reduce your debt, you can get your monthly debt payments back to a manageable level with these steps. Negotiate With Creditors Get a copy of your most recent credit report and billing statements to come up with a list of all your creditors and how much you owe. Then, figure out how much you're able to pay each. Call each creditor and let them know you're willing to pay the debt. But when you do, make sure that you have already calculated a monthly payment that works within your budget. Your credit card issuer may offer a hardship plan that will lower your monthly payments or interest rate for a period of time. If the customer service rep says no, don't fight or argue; simply ask to speak to a supervisor and make your request again. Be sure to get any agreement in writing, preferably on company letterhead, before making your next payment. Consolidate Combining your debt and paying it off with a debt consolidation loan can give you a lower monthly payment. Average the interest rates on your current balances and look for a loan that has a lower interest rate than your current average. If you qualify for the loan, you can use it to pay off your existing debts, then focus on making a single monthly payment on the loan. Debt consolidation loans aren't the only option for consolidating debt. Consider also a personal loan, home equity loan, or cash-out refinance. Be careful about getting a loan that simply lowers your payments by extending the repayment period. You'll likely end up paying more interest over time than you would otherwise. Also, think hard about putting your home up for collateral on a loan. If you can't make your payments, you could lose your house. If you're considering a personal loan, use this calculator to estimate whether your monthly payments will be lower than what you pay now. Transfer Balances If you have a good credit score, you can often get a balance transfer credit card with a lower interest rate than your other credit cards. Sometimes you can even get an extremely low introductory interest rate (as little as 0% in some cases) and use the introductory period to make interest-free payments on your debt. You can use a balance transfer calculator to figure out how much you'll save by transferring your balances. Please keep in mind that employing this strategy typically incurs a transfer fee. If this is the case, the fee may decrease the amount of interest savings that you were anticipating. Sign Up for Credit Counseling Consumer credit counselors are sometimes better skilled than you would be at negotiating lower interest rates and payments from your creditors. Enrolling in a credit counselor's debt management plan, or DMP, will allow you to get lower monthly payments, making it easier to pay off your debt. Credit counselors can also help you make a budget and teach much-needed money management skills. When you're choosing a credit counselor, make sure you choose a reputable one (hint: they're usually nonprofit). Be careful not to confuse them with debt settlement companies that offer to lower your debt, but often make your credit score worse during the negotiating stage. File Bankruptcy There are times when the debt you owe is just too much to pay, even with lower monthly payments. In this case, you might consider filing bankruptcy. Bankruptcy law prevents people from abusing bankruptcy by requiring an income-debt comparison and consumer credit counseling before you can file bankruptcy. Chapter 7 bankruptcy will allow you to completely wipe out certain debts while Chapter 13 bankruptcy will create a payment plan. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Federal Reserve. "Consumer Credit - G.19."