Tips on how to effectively manage your debts, loans
Many individuals keep on borrowing money from lending institutions, banks, online lenders, or even from their family or friends when they are having difficulty paying their debts religiously. These individuals can pay their debts but end up in delayed repayment or sometimes missed due dates.
These actions may lead to penalties, a bad credit record, and worse, strained relationships with family and friends. Thus, it’s vital that you know how to manage your finances, loans, and debt. Take your cue from the following:
Only Borrow What You Need
Do not be tempted to borrow more than what you need, even if you qualify for a higher amount. It is best to stick to the exact amount to avoid difficulty in paying your loan. Lenders will charge you more interest rates and longer payment terms if you apply for a higher loan. Don’t borrow more than you need.
Monitor to Whom and How Much You Owe
Keep a list of whom and how much you owe. Keeping track of your debts will help you pay on-time and avoid troubles with the financing institution. Knowing the overall amount of your debt will help you correctly allocate budget for it every month.
The proper way to list your debts is to include the debtor, total amount, repayment schedule, interest rate, and monthly repayment amount. If you lost track of your other debts or if you are just about to start tracking and don’t know the status of your debts, you can use your credit report as a reference.
Borrow From the Right Lender
There are so many lenders offering various lending options to the public. Some lenders can offer you a personal loan, fast loan advance, car loan, business loan, and home loan. It would be best if you choose the right loan type and lender.
Different lenders or banks offer different interest rates and loan terms. Do your research and look for a loan institution that can provide a low-interest rate with flexible terms to fit your lifestyle.
Pay More Than the Minimum
If you stick on paying your credit card’s minimum, it will take you years to pay it off. Paying an extra amount can make your debt smaller in a short time, which helps you save on interest charges over time.
You can focus on paying extra on just one card. After you paid off your credit card, you can then focus and pay extra on your next debt to quickly reduce the principal amount until you are debt-free in no time.
Monitor Your Spending
Watch your spending and remove unnecessary expenses so that you can afford to pay your obligations monthly. Prioritize your needs and your debt payments and utilities. If you feel overwhelmed with your monthly expenditures, it is time to rethink your spending.
One of the most effective ways to manage your debts is to limit any additional debt you take. The more you spend, the more your debts will drown you as you will lose track of your cash flow. Create a list of all your monthly payment obligations and necessities, always follow it, and rarely purchase anything that is not listed.
Create An Emergency Fund
All financial experts recommend that each individual should have an emergency fund. An emergency fund will help you in times when you need extra cash. This way, you would not need to acquire a loan or borrow money from someone.
Needing extra cash every once in a while is unavoidable. Everyone goes through tough times where your monthly income will not be enough to address it, such as medical emergencies or accidents. However, having an emergency fund will help you surpass this financial dilemma.
Consolidate Your Debt
It is recommended for individuals who have multiple debts to consolidate all your debts to help you properly manage your cash flow. Multiple due dates can be very confusing, which often results in occasionally forgetting to pay your obligation.
If you take up another loan to pay off all your debts, you will only need to pay one loan on one due date, and only one interest charge a month. There are two types of debt consolidation loans: the secured and unsecured loan.
You can apply for a debt consolidation loan on your bank, credit union, or credit card company. If you get turned down on these financial institutions, you can apply to a private lender. Keep in mind that acquiring a debt consolidation loan won’t erase your original debt. It will still be visible on your credit history.
We can not avoid borrowing money from lenders when we need it. However, you must know the proper way to effectively manage all your debts to avoid problems affecting your credit score. With the tips provided, you can now start organizing your finances and manage all your loans and debts.
Story by Tiffany Wagner. Wagner is an experienced web content writer whose interests extend to financial analysis, banking, and personal finance. When not working, she spends her time traveling with friends.