Summary- Personal loans are easy to avail of; however, borrowers are not always guided on managing them. This article discusses 5 useful tips to manage your personal loans.
Debt is a tricky thing to navigate through. If managed properly, it can be the best way to alleviate your financial burdens and help you fulfil your goals. But, if not taken on responsibly, it can slip away from you and harm your financial well-being in the long haul. When it comes to easy financing, personal loans are especially convenient. Its convenience can be attributed to minimal documentation and short sanction periods.
When you apply for a personal loan, there are no restrictions on end-use. It can be easy to get carried away if you are new to handling your finances or do not understand the system well. For such scenarios, the following tips will help you feel more in charge of your finances.
Set a Budget
Setting a very clearly outlined budget is the foundation for good financial planning, regardless of how much loan you are taking or how wealthy you are. Going into the loan taking process without completing this preliminary step is a mistake you should avoid at all costs as it can lead you to overlook the nitty-gritty. Furthermore, it will put you in a state of confusion. The following are a few steps in budgeting:
- Step one is to start dividing your expenditure into varied categories. Such as food, living expenses, education, debt, etc.
- There are several online tools to assist you with this and help you organise your data.
- Chalk out how much loan you need, what personal loan interest rates and EMIs you are comfortable paying monthly.
Once you outline these aspects, compare them with your income and set boundaries.
Pay More Than the Minimum
A great way to gradually pay out more without feeling a huge hit to your budget is by paying a little more than the EMI calls for. In doing so, in totality, you are paying out a much larger sum than you were supposed to in a fixed period. Not only that, but it also does not affect your expenditure or feels like a burden since it is not drastically more than the minimum amount.
Adhering to Deadlines
Sticking to repayment deadlines is essential to build a good credit history and rapport with your lender or financial institution. Making your monthly payments promptly is also a good way to avoid overhead charges and penalties. Sticking to timelines can save you a lot of money. Additionally, it reflects well on your credit score, which increases your chances of getting loans in the future.
Once you have a detailed budget in place, you will have an easier time making EMI payments on time. Having a plan and a portion of money set apart every month will prevent you from forgetting to pay or finding yourself in a cash crunch.
Keep Your Credit Score in Check
Your credit and CIBIL score is a major point of eligibility determination for availing of a personal loan. Beyond that, it also plays a role in helping you manage your personal loan once availed. Post budgeting and timely repayment, you will be bound to have an excellent credit score.
Often, borrowers lose sight of future possibilities of taking a loan when they have already availed one. It leads to them being astray regarding credit scores. Such negligence will hinder your ability to extend your line of credit in the future. The higher your credit score, the more you will be able to optimise the benefits of a personal loan, such as lower interest rates.
Consolidate Your Debt
People usually have multiple channels of debt. Nowadays, this is normal because credit cards and undertaking loans have become more accessible. While availing them is a straightforward process, repayment can be tricky due to transactions being made to various parties. Each debt you have will more probably have different EMIs and interest rates. It can get tricky to keep track of all of them.
To help yourself in such a situation, personal loans can pay off all your other debts. This way, you will pay off your other financial obligations, and you will only have one channel to make payments to. It makes handling your finances a much easier process and can even be cost-effective.
There is a plethora of personal loan lenders and offers in the market and choosing one is challenging. Follow the tips mentioned above and stay organised with your finances! After making a choice, the goal is to keep on track and not lose sight of your financial health in the long run.