Debt Help Getting Rid of Debt

4 Ways to Make Your Debt More Affordable

Written by Rebecca Lake

Boosting your income and slashing your expenses is a two-step formula for creating more wiggle room in your budget that you can throw towards debt, but you can still have a tough time making a dent if you’re paying out outrageous interest rates to your creditors. If you’ve been on a debt payoff journey for awhile, it’s easy to get discouraged if the interest is keeping you from making significant progress.

You could step up your efforts to find extra money for debt repayment but there may be a simpler solution. Lowering your interest rates or even negotiating a reduction of what’s owed could potentially save you hundreds or even thousands of dollars in the long run. If you’re ready to pay less for your debt, here’s how you can make it happen.

1. Streamline Your Student Loans

Student loans. You hate them, right? Technically considered a “good” debt, student loans are still big troublemakers for your budget. Fortunately, there are a couple of ways to make them less taxing on your wallet.

If you took out federal loans, consolidating them into a single loan can rein in your interest rates and potentially knock a few dollars off your monthly payment. Most federal loans are eligible for consolidation, including Direct, Stafford, PLUS and Perkins loans. There’s no fee to consolidate and you have the option of switching from the standard 10-year repayment term to one of the income-dependent options once the new loan is finalized.

Borrowers who are saddled with private loans can’t consolidate them with federal loans but you can still refinance with your existing lender or a different bank. Refinancing student loans is similar to refinancing a house or a car loan–you take out a new loan at a lower rate and use the money to pay off the old one. Just be aware that if you haven’t had time to build up a great credit score yet you may need a co-signer to seal the deal.

Still not convinced it’s worth the effort? Here’s an example of how much you can save by combining your student loan debt. Let’s say you have $40,000 in private loans with an average interest rate of 9.75 percent. If you’re able to refinance and knock just a single point off the rate, you could put more than $2,600 in interest back in your pocket.

2. Cut a Deal on Medical Bills

Coming down with a serious bug or getting injured in an accident is a headache to deal with, particularly on the financial front. If you’re making payments directly to your health care provider you’re probably not going to get stuck paying interest, but a huge bill can take months or years to pay off. Trying to cut down on some of the charges is a no-brainer if you want to clear the debt ASAP.

Start by reviewing your bills line by line to make sure there are no duplicate charges or costs that you don’t understand. If you see that you’re required to pay for something that you know is covered by your insurance, don’t hesitate to call up your insurance company to find out why the charge is still showing up. From there, you can approach the hospital or doctor directly to see if they’d be willing to cut you a break on whatever’s left.

3. Cash in on a 0% Credit Card Offer

Credit cards are convenient for making purchases and earning rewards but they’re not without certain pitfalls, particularly when it comes to the kinds of interest rates they carry. As of July 2015, the average APR for a card with fixed was 13.1 percent and it jumped to 15.75 percent for cards with a variable APR. If you think that’s bad, there are some cards that carry rates as high as 29.99 percent.

Shifting your debt over to a card with a 0 percent interest rate is a no-brainer if you want to save money. Consider this: if you’ve owe $10,000 to a card with an APR of 15 percent and you’re making a $500 payment each month, it would take you two years to pay it off and you’d fork over nearly $1,600 in interest in the process. Transferring the balance to a no interest card lets you hang on to the extra cash and get rid of the debt four months faster.

There are a couple of things to keep in mind about balance transfers before you jump on a deal. First, pay attention to how long the introductory period lasts. By law, credit card issuers are required to extend a 0 percent offer for at least six months but there a certain cards that give you 12, 15 or even 18 months to pay interest-free. You need to make sure your repayment schedule fits with the promotional period time frame so no interest gets tacked on down the road.

The other thing to be aware of is that most cards charge a fee for transferring a balance. The fee is typically around 3 percent of what you’re transferring and it’s automatically added on to what you owe once the transfer is complete. If you’re shuffling around thousands of dollars in debt, the fee can really add up so you want to know exactly what a transfer is going to cost before pulling the trigger.

4. Refinance Your Mortgage Loan

If you own a home your mortgage is probably your largest debt and chipping away at it is definitely more of a marathon than a sprint. When you’re trying to get to the finish line faster, changing up your loan term or going after a lower interest rate can make it easier to reach your goal.

When you refinance a mortgage you’re just taking out a new loan to replace the old one but you still have to jump through all the same hoops as you did the first time around. That means handing over certain financial information to the bank, including proof of income, a list of your debts and assets and a copy of your credit report. You also generally need to have at least 20 percent equity in the property before the bank will consider approving a refinance.

If you’re on the fence about whether a refinance is the right move, crunching the numbers can tell you if it’s worth it. For instance, let’s assume that you have 25 years left on a $200,000 loan and your current rate is 4.5 percent. If you were to refinance to a new 25 year loan but drop the rate to 4 percent, you’d save roughly $3,500 in interest.

On the other hand, if you got that same interest rate but opted for a 20-year loan instead, you’d save nearly $26,000 in interest by the time the mortgage is paid off. The only catch is that your monthly payment would go up by about $150 a month. Ultimately, what you have to do decide is whether you want to get the savings up front in the form of a lower payment or spread it out over the life of the loan by paying less interest.

Final Thoughts

Paying more for your debt than you really need to just doesn’t make good financial sense, especially when you have so many options for bringing the cost down. If you’re tired of handing over those hefty interest payments, putting these tips to work can ease some of the pain that goes along with paying down debt.

About the author

Rebecca Lake

Rebecca Lake is a personal finance writer and blogger specializing in topics related to mortgages, retirement and business credit. Her work has appeared in a variety of outlets around the web, including Smart Asset and Money Crashers. You can find her on Twitter at @seemomwrite or her website,

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