Lowering Your Monthly Loan Payment
Lowering your monthly loan payment may allow you to continue paying off your debt and avoid the consequences of defaulting on a loan. For some consumers, debt from credit cards, student loans, medical expenses and other loans becomes so overwhelming that they simply aren't able to pay all of their bills each month. Reducing a monthly loan payment may help you avoid the serious consequences of defaulting on a loan, such as wage garnishment and bankruptcy.
If you decide to lower your monthly loan payments, keep in mind that while taking this measure may provide financial relief in the short term, it will extend the length of your loan payment. During this time, interest on your debt will continue to accrue. By the time you finish paying off the loan, you will have paid more for your debt because of the additional interest.
Arranging Lower Payments with Creditors
As soon as you encounter financial difficulties, contact your creditors to discuss your options or request a loan deferment. Many creditors will agree to reduce your monthly loan payment or lower your interest rate to allow you to keep making payments on time. If you have multiple loan payments, consider consolidating all of them under one low-interest loan. With this approach, you can lower all of your monthly payments without extending the length of your debt.
If you have a low credit score, consolidating debts in a low-interest loan may be difficult. Your best option may be to approach each of your creditors to ask them if they would consider offering you a lower monthly loan payment. Be aware that you must have approval from a creditor in order to make lower monthly loan payments. If you do not pay at least the minimum payment each month, you will be charged a late fee for not making the full payment. After one or more months, your creditor will report these late fees to the credit bureaus, and your score will be affected.
Financial institutions require that you continue to make your minimum repayment until you've made arrangements to defer or lower your payments. With student loans, you may have the option to pay only the interest due on the loan if you are going through a financial hardship. After the deferral period, your regular payments will resume. During the deferral period, interest will continue to accrue on the balance of your loan, which means that you will ultimately pay more for your debt.
Working with a Debt Management Program
If your creditors refuse to lower your loan payments, or they won't lower your payments enough to make a difference in your monthly budget, contact a trusted credit counseling agency about a debt management program. Reputable credit counseling agencies may be able to convince your creditors to lower your payments and your interest rates, even if you weren't able to do so. The sooner you begin working on a solution to lower your payments, the less likely you are to default on your loan or to have your debt sent to a collection agency.
When you talk with a credit counselor, you will go over your monthly budget to determine how much you can afford to pay each month. The agency will then contact your creditors and ask them to lower your monthly repayment or your interest rate to an amount that you can manage. After your request has been approved, you will pay the credit counseling agency directly rather than sending your payments to your creditors. With a reliable debt management plan from a reputable agency, you may save thousands of dollars on a high interest personal loan.
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