If you have monthly student loans to pay off, loans for your house or car or other debts weighing you down, then you know the feeling of being strapped for cash. Large loan payments can mean not having enough cash for rent, utilities, entertainment and other day-to-day expenses. And for many folks, that means living off of credit cards, which quickly piles on debt. It's a vicious cycle, and it can mean serious financial trouble.
Reduce the monthly payments for your current loans. If you're carrying several loans at once, especially student loans, a lender may be able to offer you a consolidation loan. This is a way to replace several separate loans with one loan, and one single monthly payment, often at a reduced monthly cost. You won't necessarily lower your overall amount of debt this way, but you can lower your monthly payments.
Refinance your home loan. Refinancing your home mortgage can lead to lower monthly payments. As with a consolidation loan, a refinance doesn't lower your overall debt, but it can lessen your monthly payments and soften the blow when it comes to cash flow each month (see Resources).
Reduce your expenses. Well...Duh! But while this sounds so common-sensical, it takes attention and discipline to make it happen. Sit down with your bank and credit card statements for the past six months and figure out where your cash goes. A personal-finance program such as Quicken can make the job easier. Detail your spending. How much is spent on restaurants, movies, clothing, travel, etc. For each expense, ask yourself: "Did I really need that?" Learn where you can cut back. It may not be pleasant, but it's better than facing personal bankruptcy down the road. Concentrate on discretionary spending, but don't ignore your "essential" expenses. You may be able to lower house, car or health insurance costs, for instance, by opting for a higher deductible.
Increase your income. Consider temporary, part-time or holiday-season jobs. This provides cash for Christmas shopping, and it keeps you from getting over your head in debt. One or two nights a week waiting tables can bring in an extra $1,000 a month -- enough to make a big dent in managing your debt.
Reducing your monthly costs for loans can still mean paying more overall in the long run if your loan period is longer. Make sure you clearly understand the terms and requirements of your loans.
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