We may have given you some tips on how to avoid getting in debts in our previous posts, but we know that not all of us can be debt-free. Most of us are relying on loans and debts for good reasons, be they for business or personal stuff. In several occasions, loans can save our lives and help us realize our dreams. Not only that, but they also offer the convenience of acquiring hefty amounts in just a short time.
However, loans have two sides of a coin. Loans may save your life, but they can also destroy you as well. A loan, if not managed properly, and worse if you cannot pay it, can backfire on you. In just a snap, your business or personal property may be forfeited for being unable to pay the debt or interest in your loans.
“There are 350 varieties of shark, not counting LOAN and pool.”
― L.M. Boyd
What can we do to prevent that from happening? Here are our effective tips in managing your loans and debt properly.
Don’t Borrow Loans from Banks
When we try to think of mediums to loan, the first thing that comes to mind is banks. That is a given since big banks offer loans at steady rates. It is ideal if you want to borrow large amounts, especially if you want to start a business.
However, because of the bank’s stability, borrow from banks can be a bit more challenging and daunting than it can be rewarding. Why? Because bank loans have higher interest rates and their collateral requirement is so enormous that it may put your assets at stake. Therefore, instead of getting a loan from a bank, look for alternative financial sources with low-interest rates such as:
- Credit unions
- Digital lenders
- Peer-to-peer lending
- Cash advances on credit cards.
Reduce your Debt by Consolidating your Loans
If you have several outstanding loans, it is better to seek a financial expert to consolidate your loans. A financial expert can advise you on how to minimize your interest rate by paying your loan in one go. Moreover, transfer of debt balance is also recommended in order to lower down your debt, especially if your loans are payable in a short period of time.
Choose the Most Suitable Offer
You may feel overwhelmed by the vast opportunities these financial organizations are offering to you regarding loans. However, you must think carefully before committing into one. One way of knowing the best offer with the lowest interest rate and payment terms is to have your personal or business loan calculator.
This way, you’ll be able to compare the rates and offers of different financial institutions. Not only that, but you can also see the actual prices you need to pay as well. Having a personal or business loan calculator comes in handy especially if you have business loans, which are difficult to deal with.
Automate your Monthly PaymentsIncome – Savings (or paying loans and debts if you have one) = Expenses.
Just like managing your bills, your responsibility to pay your debts or loans is non-negotiable. If you don’t want to drown yourself in debt, you must learn to pay your debts first after your bills. You can do this by automating your monthly payments. By so doing, you won’t have to worry about any penalties if you happen to miss paying on your due date. This will also help you to control and budget your money and expenses properly. Remember this master formula in order to become financially stable.
Prioritize your Debts
This tip is actually in connection to the previous one. If you have a debt, you should learn to prioritize it the way you pay your monthly bills in order to live a sustainable life. This means that you may have to suspend spending on your wants or unnecessary things to pay your debts first. Otherwise, someday, you might find yourself drowning deep in debts with no way out. Believe us when we say that it may suck, but it’s only temporary. Have a financial expert to teach you how to manage your income and pay your debt properly.