There is a bit of good news this year about the average American household debt. Reuters.com reported last August that the overall consumer debt went down by 0.7% in the second quarter of 2013. From the 8.1% during the first quarter of this year, it is now down to 7.6%. Although the debt is still high at $11.5 trillion, the fact that it has gone lower proves that consumers are making good progress with their credit obligations.
Debt is a destructive financial situation that most of us are saddled with and we all want to get rid of it fast. Despite the news that the economy is slowly gaining ground and unemployment is down, people are still struggling to meet their monthly debt payments. A lot of them are still searching for ways to lower the payments they are required to meet on a monthly basis.
Why you want a lower monthly payment plan
There are many reasons for consumers to want lower debt payments.
Income is lower than before. Some consumers never really recovered the income that they used to have before the recession hit. Although there are jobs available, these did not provide the same compensation that could support our usual expenses. Between our basic necessities and debt payments, we obviously want to lower the latter.
Less restrictions on the budget. There are people who are able to meet their monthly debt payments because they started to live a frugal lifestyle. It is advisable to maintain this type of living even if you increased your income but there is something to be said about having a budget for your entertainment expenses too. It is not a good idea to remove your fun activities entirely and if you can lower your monthly contributions, you can loosen some of the restrictions that you have on your budget.
More funds for saving. No doubt about it, growing your savings is a must in any debt relief program. You are advised to at least grow your emergency fund because it will help keep you from incurring more debt. However, given your limited resources and the combined expense of your basic necessities and debt payments, saving money may be hard to accomplish – or at least will be a very slow progress. Lowering your payments will help give room for your savings and help you build up your funds faster.
Debt solutions that lower your monthly credit contributions
Fortunately for you, there are several debt relief programs that will help you lower your debt payments. Your choice among these options will depend on your debt situation and your ability to pay off your dues.
The first option that you have involves a restructuring of your debt payments so that you can lower your monthly bills. This is called debt consolidation. There are two ways to do this. One of them is known as debt consolidation loan and it involves a master loan that you will apply for to use as payment for your multiple debts. If you have mostly credit card debt, you will benefit from the lower interest rate of personal loans and secured loans. That will help lower your monthly debt payments. Not only that, you will be stretching your current balance over a longer payment period and that will bring your payment requirements even lower.
The second way to consolidate your debt is through debt management. This debt solution includes a credit counselor in the picture who will analyze your debts and finances to come up with a debt management plan. This will show the lower monthly contribution that you will propose to pay your creditors. When they agree, you will send one monthly payment to your counselor who will distribute the amount to your different creditors. They will also try to negotiate for a lower interest rate that could help lower your payments further.
The other option to lower your debt payments is debt settlement. Compared to the previous debt solution, this will give you debt reduction. Although debt consolidation can lower your monthly payments, you still get to pay the whole amount of your debt. With debt settlement, you are after the forgiveness of a portion of your debt. You will convince your creditor that you are in a financial crisis so that they will allow you to pay only a part of your debt. If you have a big amount of money that can cover a percentage of what you owe, you can offer to give that to the creditor but only if they agree to forgive the rest of the balance.
Apart from these debt solutions, lowering your monthly payments will also depend on the financial management skills that you will implement. These include not incurring any more debt and living below your means.
Here is a video from eHow that discusses creative ways that you can lower your monthly bills. If your reason to lower your payments is to have enough room on your budget for your savings, lowering your overall expenses can also help out.