4 Ways To Shrink Your Debt Payments When Your Wallet Feels Stretched

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• Debt isn't always bad, but if you're struggling to make payments, it can make budgeting harder.
• In some cases, you might be able to renegotiate your debts directly with your creditors.
• Refinancing, debt consolidation, and debt relief could make repayment more manageable.

Carrying debt can feel like a massive weight. When you owe money to lenders, it can be difficult to save and invest — both of which are important steps to reaching financial milestones like retirement.

And yet many Americans are in this position: Total household debt hit $18.04 trillion in the fourth quarter of 2024, according to data from the Federal Reserve Bank of New York.

A recent report from Lending Tree found that on average, Americans put $1,597 a month toward paying off debt. When you're paying for housing, utilities, groceries, and more, allocating a chunk of your budget to paying back lenders isn't easy.

Debt can be an important part of a healthy financial life, especially when it's used to fund things that will grow in value or increase your earning potential, such as a house or an education. But holding debt — especially high-interest debt like credit card debt — can be extremely stressful.

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, identity and tell them how much you have left each month to pay toward your loans.

2. Consider refinancing

Refinancing a personal 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.

"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.

If you're dealing primarily with credit card debt, you may want to consider transferring your balance to a 0% APR credit card. The catch here is that companies only give you a certain amount of time with the 0% APR, often between a year and 18 months. After that time period is up, the rate will increase, so you want to be sure you can pay off the debt before that happens.

4. Seek professional help

For borrowers who are really struggling, debt relief companies (also referred to as debt settlement companies) can negotiate with lenders 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 debts, make a single monthly program deposit, and get a concrete timeline (usually 24-48 months) for when all your enrolled debt will be resolved. Note that most debt settlement companies require unsecured debts of at least $7,500 to be eligible for the program.

That's not to say debt settlement companies are a perfect solution: You'll pay a fee for their services, your credit score can suffer, and there's no guarantee that the company will actually be able to get you a lower balance — ultimately, it's up to your creditors.

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.

If you decide to go with a debt relief company, check that it's verified with the Association for Consumer Debt Relief, the International Association of Professional Debt Arbitrators, or the Consumer Debt Relief Initiative. 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.