Life has a way of making us face numerous financial obligations, sometimes all within a short span of time. In such a situation, we are often left with little choice than to procure multiple loans. While these loans help us fulfil our obligations in a timely and efficient manner, they leave us debt-ridden. For all we know, most of us have a Home Loan and a car loan under our name, and in some cases even Personal Loans. This doesn’t come as a surprise in the modern day world, since there are numerous needs that ought to be taken care of even after having a dream home and the choicest car. That being said, the unfortunate reality is that not only do these mounting debts make us feel financially crippled, but also create a strain on our quality of life. Thankfully for us, this can all be taken care of, simply by adhering to the below mentioned tips.
1. Prioritise Your Personal Loan Repayments
Since the interest on Credit Card bills is significantly higher than that on Personal Loans, it is obvious for you to think that you should be paying off your Credit Card bills first. However, you must remember that missing out or delaying the payment on an equated monthly instalment (EMI) will cost you more dearly as compared missing out on a bill, with regards to the blow your credit score will receive. A single missed out payment on a Personal Loan can lead you to lose up to 50 points, which is not the case with missed Credit Card payments. While it is crucial for you to service all your debts with promptness, in the case where you can’t, prioritise your Personal Loan payments.
2. Limit Your Credit Card Debt
It is understandable that with too many loans to juggle, sometimes it may be difficult for you to make ends meet. This cash crunch can tempt you to use your credit card recklessly. However, you must remember that your credit card bills, if not paid in time, can attract an exceptionally high interest of 35 to 40% per annum. Due to your already complicated debt situation, it would be practically impossible for you to service these expensive bills, thus further creating a strain on your finances. Hence, it is best to use your credit card as sparingly as possible, when you are trying to manage multiple loans.
3. Try to Prepay One Loan at a Time
Prepayment of loans is a great way to significantly reduce the interest outgo on a particular loan, while also shedding off the financial and emotional burden that it carries. When you have multiple loans on hand, try to prepay the loan which attracts the highest interest, with priority. Only once you have been able to pay off all the other loans should you move ahead to pre-close your Credit Card accounts.
4. Consolidate Your Debt
Multiple loans can be challenging to manage, especially when they have different due dates for EMIs. A great way to get rid of this problem is by consolidating your debt to a single source. While it may not be a convenient process to consolidate your mortgage all at once, it will be well worth the effort. Some of the top banks in the nation offer debt consolidation loans, while there are others who provide Personal Loan offers, which can be used to pay off your all your other existing debts and then service nothing else, but the Personal Loan. Either way, you can avail this facility only if you enjoy full-proof Personal Loan eligibility complete with an excellent credit score and a stable source of income.
5. Don’t Take Credit to Pay Off Credit
When the going gets tough, it may be quite tempting to opt for a small loan from a friend, family member or even your bank to pay off your EMIs. However, this will only push you further into a debt-trap. The best way to deal with such a situation is to cut down on your expenses as much as possible, and even look for additional sources of income. Taking yet another loan will not only hurt your financial situation even more but will also adversely affect your credit score. This, in turn, will make it excruciatingly painful for you to get approvals on loan applications in the coming time.
We hope that with the help of the tips mentioned above, you will find it easier to manage your loans more efficiently and that you will be able to enjoy a debt-free life sooner rather than later!
Written By Reshma RawatAssistant Content ManagerCredit Cards, Credit Score, Personal Loan, Home Loan, etc.
Reshma Rawat is a passionate writer with a decade of experience in writing for a variety of domains (finance, technology, lifestyle, e-commerce, real estate, etc.). Currently, she is working as Assistant Manager - Content @MyMoneyMantra and writes blogs & webpages on financial products (loans, credit cards, insurance, government financial policies, mutual funds, etc.).
