Debt can be an important part of a healthy financial life. But holding debt — especially high-interest debt like credit card debt — can be extremely stressful.
A survey from Achieve.com and Money.com found that half of Americans holding debt say they feel anxious about their debt. Forty-four percent say their debt makes them feel hopeless.
The same survey also found that 34% of Americans say they're unable to make their full monthly debt payments, and that more than a quarter of respondents say their debt feels unmanageable.
While the long-term goal is usually to be debt-free, there are steps you can take now to shrink your debt payments and give your budget a little room to breathe.
1. Negotiate with your creditors
The terms of your loans may seem set in stone, but they could actually be negotiable.
"If you have private loans and are having trouble paying, the loan servicing company is often happy to work with you," says Catherine Valega, financial advisor and founder of Green Bee Advisory. "Start by calling them and discussing your options."
Valega says to say you're calling to ask for more lenient loan servicing terms, then explain to them what is impeding you from being able to make payments, such as losing your job or having medical bills. Tell them you've created a budget of your basic needs, not wants. Using that budget, identify and tell them how much you have left each month to pay toward your loans.
If you want to tackle the debt yourself, you can also seek out credit counseling agencies or other nonprofit resources that offer debt consultations with no fee.
2. Consider refinancing
Refinancing a loan allows you to pay off your existing loan with a new one, essentially replacing that existing loan with one that ideally has better terms.
"Refinancing can be a good option for lowering your payments and lowering your interest rate," says Kassi Fetters, financial planner and founder of Artica Financial Services. She recommends checking the options at your local credit union when refinancing your loans or credit card debt.
Keep in mind that if you refinance to a loan with better rates but a longer repayment period, you may increase the total amount of interest you'll pay over time.
3. Consolidate your debt
Debt consolidation loans replace multiple debt payments with a single one, and you may be able to snag a lower rate and monthly payment this way.
One way to consolidate your debt is through a personal loan, which can simplify your payment process by allowing you to pay a single lender instead of multiple lenders, and may shrink your monthly payment. Remember, though, that consolidating your debt through a personal loan only lowers your monthly debt payments if the new payment is smaller than your previous payments; this is something you should know for sure before agreeing to the loan.
"While it can definitely make paying back loans easier, be sure to fully understand the new interest rate and payment, and compare it to the sum total of the other payments," Valega says.
4. Seek professional help
For borrowers experiencing financial hardship or struggling to keep up with unsecured debt, debt relief companies (also referred to as debt settlement companies) can negotiate with creditors on your behalf to reduce the total amount you owe.
When debt gets overwhelming, debt settlement could be a lifeline that stands in the way of declaring bankruptcy. Debt settlement companies step in to negotiate with your creditors, asking them to settle for less than you originally owed. This option enables you to enroll multiple unsecured debts, make a single monthly program deposit, and get a more concrete timeline (usually 24-48 months) for when all your enrolled debt will be resolved. Note that eligibility requirements vary by provider and may depend on factors such as the amount and type of debt, financial hardship, and your overall financial situation.
Debt settlement can provide meaningful debt reduction for some people, but it's important to understand both the potential benefits and tradeoffs before enrolling in a program. Whether you negotiate directly with creditors or work with a debt relief company, your accounts may become delinquent during the negotiation process. There may also be temporary credit impacts depending on factors such as payment history, account status, and how debts are ultimately resolved.
While creditors are not required to agree to a settlement, reputable debt relief companies have experienced negotiators who regularly work with creditors and can help consumers navigate the process. Reputable debt relief companies also understand that there is no one-size-fits-all approach to managing debt and will evaluate your overall financial situation before recommending a path forward. If debt settlement isn't appropriate, they'll help you understand other options that may better fit your circumstances.
A reputable debt relief company should be verified with the Association for Consumer Debt Relief, the International Association of Professional Debt Arbitrators, or the Consumer Debt Relief Initiative. Remember that by law, debt relief companies can't charge upfront fees. If a company tries to charge you before negotiating with your creditor and getting your approval on the settlement, choose another company instead.
It's easy for debt to feel overwhelming, but you do have options to make monthly payments more manageable.