iCrowdNewswire Dec 18, 2020 1:29 AM ET
Leading a good lifestyle comes at a cost. Eating at expensive restaurants, buying the most coming-of-age gadgets, wearing high-end brands, and travelling to fancy travel destinations requires money, and those, who do not have the sort of income that could support their lifestyle, rely on loans.
To pursue the life of their choice, people often take several loans without considering the repercussions. While getting finance is easy, managing multiple loans often gets tough. However, certain tricks prove potent in paying off debts right on time without inviting penalties and unwanted stress.
If you are shouldering the burden of multiple loans, here is your guide to managing them:
- Create a budget
You may not like cutting corners but if you are seeking the best ways to manage multiple loans, creating a budget and strictly sticking to it emerges as the best idea. With a budget, you get a way of taming your out-of-control financial spending and prepare for a stress-free future.
With a budget, you will always know where your hard-earned money is going and take measures to arrest overspending. To create a budget, start by categorizing your expenses, for instance, food, shelter, shopping, entertainment, necessities, etc. You can be more specific with the categories to get a clear picture of your spending habits and keep a track of them.
- Start by paying the most expensive loan
Create a list of all your loans in descending order of their interest rates. Pay the loan with the highest interest rate first. For instance, if you have taken payday loans, pay them before paying your personal loan, which is often a low-interest loan.
If your income rises or you get a bonus or return from your investment, hike the EMI of the most expensive loan to clear the debts. Once you have paid off your most expensive loan, move to the loan with the second-highest interest rate.
Keep paying for the other loans simultaneously.
- Avoid penalties
Not paying your monthly EMI on time can make you fall into the trap of penalties. To avoid paying an extra fee, pay your debts on time. When creating your budget, set aside the money for your monthly installments to avoid the terrible situation of not having money to pay off your debts. You can also set an automated payment system for the same. It’s always better to make early payments to avoid incurring extra charges.
- Opt for debt consolidation
Debt consolidation is the best way to manage high-interest loans. With a debt consolidation loan or a personal loan, you can pay off your high-interest loans and shed off your loan burden.
Debt consolidation is when you take one large loan to repay multiple debts and loans. With this, you can make a single payment to a provider instead of paying to multiple lenders every month with different interest rates. It is a beneficial deal for you if the interest rate of your new loan is lower than the average interest rate of your old loans.
- Pay more than the monthly minimum
If every month you pay more than the monthly minimum, you will be able to get rid of the debts sooner without incurring extra expenses. By staying ahead of the loan term, you won’t just reduce the length of the repayment plan but also reduce the interest amount, saving a great deal of money.
Clearing all your debts faster than anticipated will also help in improving your credit score. However, to nullify the benefits of early loan repayment, several providers charge an extra fee. Make sure you read the terms of your loan provider before paying more.
The bottom line
Loans always help you in leading the life of your dreams. Moreover, some lenders, like Blink Finance, help you by offering payday loans when you need money the most. So, do not hesitate in taking loans but learn to manage them. Use these tips to manage your debts.