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5 Ways to Lower Your Debt Payments

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If your debt looks like a mountain and your budget feels like a shovel, you probably feel like it will take a miracle to get rid of your debt for good. The miracle you need might be in one of these five ways to lower your debt payments. Start at the top of the list and work your way down. At least one of these, possibly two or three, will work in your favor and help you get those debt payments to a manageable level.

1. Negotiate with creditors

It only makes sense to ask the people you owe for a break. Use your credit report and recent billing statements to come up with a list of all the people you owe and the amount you owe them. 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 can only afford to pay $X. If the customer service rep says no, don't fight or argue, simply ask to speak to a supervisor and ask again. Make sure to get any agreement in writing, preferably on company letterhead, before making a payment.

2. Consolidate

Combining your debt with debt consolidation or home equity loan can give you a lower monthly payment. Average the interest rates on your current debt and look for a loan that has a lower interest rate than your current average. 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.

3. 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 low as 0% in some cases) and use the introductory period to make interest-free payments on your debt. You can use this CreditCard.com's balance transfer calculator to calculate how much you'll save by transferring your balances.

4. Sign up for credit counseling

Consumer credit counselors are sometimes better skilled at negotiating lower interest rates and payments from your creditors. They know just the right thing to say. Enrolling in a credit counselor's debt management plan, 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 non-profit). Be careful not to confuse them with debt settlement companies who often make your credit worse.

5. File bankruptcy

There are times when the debt you owe is just too much to pay. In this case, you might consider filing bankruptcy. The new bankruptcy law prevents people from abusing bankruptcy. It requires an income-debt comparison in addition to 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.

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