When Your Dollars Just Won't Stretch: Three Options To Make Your Debt Payments More Affordable

You are making the minimum payments on your debt, but the balances just aren't decreasing. Or, perhaps you don't have enough money each month to make all of your debt payments and you find yourself constantly borrowing just to make ends meet. Stop living in financial distress; instead, explore the following options to make your debt payments more affordable.

1. Consolidate Your Debt With a Low Interest Loan

The interest rate for credit cards and unsecured loans tends to be high, making these types of debt expensive and difficult to pay off. One way to get ahead is to consolidate all of your expensive debt with a consolidation loan that has a lower interest rate.

For example, if you have a credit card with an interest rate of 15 percent and a personal loan with an interest rate of 10 percent, consolidating this debt with a loan that has an 8 percent interest rate saves you as significant amount of money in interest expenses.

There are loans specifically created for debt consolidation. If you are turned down for a debt consolidation loan, you can use another type of loan product, such as a 401(k) loan or home equity line of credit, to pay off your high interest debt. Then, you make one affordable payment each month.

If you have missed payments in the past or have maxed out your credit cards, you may find it difficult to procure approval for a consolidation loan with favorable terms.

2. Enroll in Credit Counseling

Enrolling with a non-profit credit counseling agency can help you lower your monthly debt payment and your interest rates. The credit counseling agency works on your behalf to negotiate better terms for your debt. In exchange for these lower interest rates, you agree to close your revolving credit lines and credit cards.

Credit counseling is successful for some, but for others, the payments are still too expensive. If you miss a payment, you can get kicked out of the program and the credit card companies can revoke the terms of your credit counseling agreement.

3. File for Chapter 13 Bankruptcy

Chapter 13 bankruptcy is actually a form of debt consolidation. You make one monthly payment each month to repay a portion of your debts; at the end of your bankruptcy term, the rest of your unsecured debt is dismissed. If you are behind on your mortgage payment or your vehicle payments, chapter 13 bankruptcy can help you get caught up on your loan without losing your home or automobile.

How much you have to pay each month and the amount of your debt that you repay varies depending on your income, the amount of your debts, and the type of debt that you have.