In a world where people are driven by words like YOLO (“you only live once”) and FOMO (“fear of missing out”), living beyond means has become all-too-common – and getting finance to live a whimsical life has become all-too-easy.
While living a life that their income doesn’t allow, people often overlook the dangers lurking behind their fancy lifestyle. Result? Multiple loans that can easily lead to tricky debt situations. In this article, we’ll discuss 6 smart ways to manage multiple loans better.
1. Apply the ‘avalanche’ method.
Make a list of your debts according to their interest rates. Create a plan to make the largest payment on the loan whose interest is the highest. Continue paying regular payments on the other loans. When the loan with the highest interest rate is paid off, move on to the next, and so on.
2. Bump up your EMIs with every salary hike.
One of the simpler ways to manage loans is to increase your EMIs every time your income rises. By bumping up your EMIs, every time you get a raise, you cut months or even years off your loan repayment. And you save money on interest too.
3. Any windfall should go towards debt repayment.
If you receive an unexpected bonus or return on an investment, it may be tempting to spend it on a lifestyle purchase. But when you are in debt, wouldn’t it be wise to use that money to find a way to reduce the debt burden? Many lenders allow you to pre-pay the loan without incurring any penalty.
4. Consolidate your loans.
Debt consolidation is one of the popular ways to reduce the loan burden. Consider taking a personal loan or a debt consolidation loan to pay off your existing high-interest multiple loans. Debt consolidation not only saves the hassles of making multiple payments, but it also reduces your interest outflow, making it possible for you to pay off the loan faster.
5. Convert credit card dues to EMIs.
Many credit card companies offer their consumers a facility to convert their credit card dues into easy EMIs. Splitting your payment into EMIs gives you the much-needed breathing space as you will paying the dues over a period of time that suits your budget. Also, the interest rate charged when you convert your credit card dues into EMIs is lower compared to the interest charged on late payments and the interest calculated on monthly reducing balance.
6. Make timely payments.
Paying several EMIs to service your multiple loans is bad enough. And when you miss making payments, you only make matters worse. Inculcate a good habit of making your monthly payments on time. Set reminders or set up automatic payments from your bank account.
With a little planning and these smart ways to manage multiple loans better, you can enjoy a disciplined yet a debt-free life.