Smart strategies to reduce monthly payments

Although inflation is stabilising and interest rates are expected to fall, the cost-of-living crisis has left many people struggling financially. According to The Money Charity, the average debt per UK adult in July 2024 was £477.14 higher than it was 12 months prior. 

If you’re looking for ways to reduce your monthly outgoings and balance the books a little better, check out our helpful tips.

Refinancing your loans to lower interest rates

Refinancing involves replacing an existing loan with a new one on better terms – usually a lower interest rate. It can be particularly beneficial for mortgages, where rates often go up after 1-5 years, as well as personal loans. Securing a lower interest rate can quickly reduce your regular payments and decrease the amount you’ll owe over the long term.

If you have multiple debts with varying interest rates, debt consolidation loans can bring them all together in one payment. This could save you money and make it easier to keep track of your outgoings, reducing the risk of missing repayments.

Cutting unnecessary expenses

Before doing anything, though, it’s a good idea to thoroughly review your budget. Start by tracking your spending over a month to identify where your money is going.

Look for non-essential expenses such as unused subscriptions, takeaways and impulse purchases. Once you know how much you’re spending in these areas, you can eliminate them or set yourself a limit. This should free up funds for essential expenses.

Consider using a budgeting app like Emma to help you get started and monitor your progress. 

Negotiating payment terms 

When refinancing or cutbacks aren’t sufficient, contact your creditors to discuss lowering interest rates, adjusting repayment schedules, or reducing monthly fees.

Utility providers, credit card companies and mortgage lenders are often open to negotiation, especially if you explain your financial difficulties early on. Taking a proactive approach could result in temporary relief or more favourable terms. 

Some mortgage lenders offer “payment holidays”. However, beware that this will show on your credit file and may make it harder for you to borrow money in future.

Seeking professional financial advice

Financial advisers or debt charities can help with personalised solutions, such as debt management plans or assistance programmes. They can also guide you in negotiating with creditors or restructuring your repayments to make them more affordable.

StepChange Debt Charity and National Debtline offer free, confidential advice that may be useful, too. This can include arranging a budget for you and providing tips for dealing with businesses you owe money to.