How to Lower Your Personal Loan Payments

Personal loans are a great way to access funds for various business purposes, but if the payments are too high, they can become a burden on your cash flow.

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By Baruch Mann (Silvermann)

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Personal loans are a great way to access funds for various business purposes, but if the payments are too high, they can become a burden on your cash flow.

With rates increasing, you may find that your personal loan repayments have become more expensive. Whether you have just one personal loan or multiple loans, if your monthly payments have increased, it can make it more difficult to manage your money and stay on top of debt.

One of the ways that you can reduce your financial burden is by lowering personal loan payments. Personal loans are a great way to access funds for various business purposes, but if the payments are too high, they can become a burden on your cash flow.

Here are some strategies for lowering your personal loan payments as an entrepreneur.

Repay early

This is an ideal scenario, and even if you can't repay the loan in full, you can reduce the amount of interest and lower your payments. If you have savings, you can make a lump sum payment on your loans. Just be sure to check if any of your loans have early repayment fees. If so, you will incur a hefty percentage fee, and it could negate the early repayment.

If you don't have savings, it may be time to take a look at your budget. If you don't have a budget, set one. Take a look at your bank statements, credit card bills and other paperwork to calculate all your essential costs, including rent or mortgage payments, food costs, utilities and taxes.

Next, look at what you spend on non-essentials and see if there are areas where you can make cuts. Of course, you don't need to live a spartan life, but do you really need two or three television subscription services? Can you cut down on dining out twice a month rather than every week? Any extra money you can find within your budget can go towards paying off your personal loan.

Related: 8 Things Entrepreneurs Should Look for When Getting a Business Loan

Adjust the loan term

Another way to lower your payments is by extending the loan term. This will reduce the monthly payments but increase the overall interest you pay over the life of the loan. This strategy may be a good option if you need some time to build up your business and increase your income.

You will need to speak to your lender or arrange a new loan deal for this approach. Increasing the loan term will reduce your monthly repayments, but you will pay more in the long term. However, if you're feeling the pinch and are prepared to repay your loan over a longer term, it could be an option for you. If you have extra cash, you could put this towards reducing your loan term. If you arrange to repay your loan over a shorter period, you'll pay more now but end up paying less interest and clearing the loan more quickly.

Get an income boost

If you have extra cash flow, making extra payments on your loan can help you pay off the loan faster and lower your overall interest costs. This can also help improve your credit score, making it easier to secure funding in the future.

You will need to think about this strategy according to your specific circumstances. You may be able to negotiate a pay raise at your current job or switch to a better-paying job.

However, for many business owners, these options are not possible, so you may need to look at a side hustle. There are a number of side gigs in the marketplace, such as food delivery, ridesharing, freelancing and many other ways to monetize one of your existing skills or hobbies. You could even consider selling any unwanted items online or renting out space in your home.

This doesn't necessarily mean that you'll need to have a roommate — many sites allow you to rent out garage space, driveways and other areas that allow you to maintain your privacy and earn a side income. You can then use this additional income to reduce your debt.

Related: What is a Good Personal Loan Interest Rate?


If you have a good credit score and a stable income, you may be eligible to refinance your personal loan at a lower interest rate. This can significantly lower your monthly payments, making them more manageable for your business.

A debt consolidation loan will allow you to merge all your unsecured debt into one loan. This is a sound strategy, particularly if you also have high-interest credit card debt. You'll not only enjoy lower monthly repayments, but your obligations will be easier to manage as you'll have just one bill each month. In some cases, you may be able to lock in a reduced rate, making your debt more affordable.

Just be aware that refinancing will require a hard credit search which could impact your credit score. You will also need to choose your loan options carefully, as some deals are only available to those with excellent credit. If your credit score has dropped since you took out your current personal loans, you may be offered a higher rate — which means your debt will cost you more in the short and long term.

Contact your lender

If you have a good payment history and a solid business plan, you may be able to negotiate with your lender for a lower interest rate. This can be done by providing financial statements and a business plan that shows how you plan to improve your income. Many lenders are willing to work with those who are having payment difficulties.

Your lender may be willing to accept a number of scenarios, including creating a different repayment schedule, settling the debt with a smaller lump sum payment or temporarily putting your payments into forbearance. This allows you to temporarily stop making payments so that you can get your finances under control.

If you are negotiating with your lender, make sure you ask what they will report to the credit bureaus so that you know how settling your debt will impact your credit. You should know beforehand that your credit score could take a hit.

Related: What You Need to Know About Personal Loans

Many of us are feeling the effects of the uncertainty in the economy right now, so it is natural to be concerned about your personal loan obligations. Fortunately, there are a number of ways to lower your personal loan payments. However, it is important to think about how making changes to your personal loan will impact your credit in the future.

If you're experiencing temporary financial issues, it may be better to tighten your financial belt for a few months to get over a hump rather than taking action that may have adverse effects on your credit. The sooner that you recognize that your personal loan payments could be a difficulty, the better your chances of finding an effective solution.

Baruch Mann (Silvermann)

Entrepreneur Leadership Network Contributor

Entrepreneur, Investor, Analyst

Baruch Silvermann is a personal finance expert, business analyst, investor, digital marketer and founder of The Smart Investor. But above all, he is passionate about teaching people how to manage their money and helping millions on their journey to a better financial future.

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