Borrowing comes in many forms such as mortgages, personal loans, hire purchase and credit cards. Obtaining loans often appears to be a very fast and easy method of financing your needs, both short term and long term and if proper caution is not taken, it might turn out very difficult to manage these debts.
Your debts can end up being too many for you to handle or you might become bankrupt if you depend too much on debt financing for all your plans, even those that are not urgent to the extent of necessitating a loan.
Here are some of the tips you can use in you debt management:
Consider all possible options available
If you decide that you need to borrow money or any other form of debt, it is very important to research on all the possible places that you can obtain your loan from. It is advisable to select a source of finances that will cost you the least, as much as possible. You will need to consider the interest rates charged by various financial institutions, the repayment period allowed for the whole amount and how frequent the repayments will be. This will ensure that you obtain a loan that you can easily manage without straining you budget.
Think carefully before you borrow
Before you can go ahead to borrow, it is very crucial to make a informed decision as to whether you really need the loan, or whether you can do without it. You should first consider the cost of borrowing and weight it against the benefit you get. It is always advisable to live within your means as much as you can because borrowing is very costly and if there are other means of accomplishing what you want without borrowing, then it is better to go without the loan. This calls for you to exercise discipline on matters of debt financing.
Pay off your debts fast
One easy way of managing the debts you have is paying them off as fast as you can because the longer time you take to settle your debt, the more costly it will be. If you have more than one debt, you should prioritize them and start by paying off the debts that have the highest interest rates first like credit cards, and then later you pay those with lesser interests.
Debt consolidation
This involves combining several debts into one and negotiating with the financial institution you’ve borrowed from for a harmonized interest rate which you can manage. This reduces the burden of repaying many loans, which could be having high interest rates and might be getting out of your control. Consolidation however comes with certain risks such as increasing the period with which you are to settle the debts and you may end up paying higher interest charges for the older debts.
Get help if you are struggling with debts
You may realize that your debts are getting out of hand and it might be impossible to settle your obligations when due. In this case, the most prudent way to handle them is by approaching you lender and explain to them your struggles. They will help you reduce your burden by either reducing the periodic repayments or allowing you to pay your debts for an extended period that you can cope with without struggling a lot.
Sourced from: Alot
Posted on May 22, 2023