Personal loans help people, even those with very successful careers, handle financial curveballs, take advantage of great job opportunities, offset and prepare for some of life’s pleasant and sometimes unpleasant surprises. But they have to be used responsibly.
Debt, no matter how small, has to be properly managed, so it doesn’t get out of control. It is even more important when there is a large amount of debt to be paid off – for example, a mortgage – because you’ll have to work twice as hard.
Managing your debts does not have to be a herculean task if you follow our suggestions below:
Find out how much you owe
To effectively manage your loan repayments, you need to know exactly how much you owe. Make a list of your debts and the creditors – take note of the total amount due, monthly payment amount, and due dates. We recommend using a credit report to crosscheck the debts on your list.
Drawing up a list of how much you owe will provide you with the data that you’ll need to draft an effective repayment plan.
Pro tip: Update your list regularly to reflect the changes made to the overall debt amount.
Consolidate your Loans
Consolidating your loans is a smart way to manage your debt. For example, you can use balance transfer credit cards as a way to commit to paying down your debt before the teaser rates go up.
There are still 0% APR credit cards offers readily available, so you can consider this option – transfer your debt balances over and be aggressive about paying off your debt at the 0% rate.
Please note, only choose this option if you are certain you’ll be able to make the repayment within a short window.
Pay more than your Monthly EMI
Do not be tempted to go too easy on yourself by consistently opting to only pay the lower rate of EMIs (Equated Monthly Installments) because, in the long run, you’ll end up paying a lot more to your lender.
If you find yourself with extra income or get a windfall at any time, the smart choice would be to use it to offset some of your debt. Even though some people prefer to keep the extra money in an emergency fund, if you have a large sum of debt, then that should be your priority and every extra penny goes a long way.
Make Timely Repayments
If you fail to do anything else, do this. You can quickly find yourself in trouble if you do not make your loan payments on time. Paying your bills late will make your rates go up. This is why, regardless of what happens, you should do your best to make your payments on time because late or missing payments will negatively affect your credit score.
If you struggle with this, then addressing your debt should definitely be a priority. Cut down on expenses by sticking to the barest essentials, so you can make timely loan repayments.