How to Reduce Your Loan Burden Without Stressing Your Wallet
Loans are tools that help you when you are in need of money. Whether you take a personal loan to tide over tough financial times or take a home loan to buy your dream home, the fact remains that these loans have to be repaid with interest.
If you have taken a loan, you need to have a proper plan to repay it. Otherwise, you’ll be stuck with the debt for long, making it difficult to manage it.
Want to get rid of debt without stressing your wallet? Here are a few ways to reduce your debt burden.
Start with a budget
Everything about managing your finances has to start with a budget. The budget you plan is not going to directly help you reduce your debt, but it will give you an idea of how much you are spending and guide you to live within your means so that you free up money to put towards your debt repayment.
Make a list of your expenses and create a budget. Cut all unnecessary costs; spend on your needs and not on your wants. Whatever money you save, put it away to pay your debt.
Choose the EMIs you can afford
Choose a repayment tenure depending on your affordability and repayment capacity. Use an EMI calculator to know your EMIs in advance.
Remember, the longer the repayment tenure, the smaller will be the EMI, and vice versa. Your financial capability is the primary factor you need to consider while choosing the EMI amount.
Increase repayments as your income increases
As your career progresses, your income also increases. With every rise in your income, however modest it is, make it a point to increase your repayments. This will reduce the number of EMIs and help you pay your loan faster.
Use windfall gains to repay costly debt
Don’t splurge your windfall gains, such as bonuses, maturity proceeds from bonds/life insurance policies, etc. on the latest smartphone or gadgets. Use it to pay off your debts.
5. Consolidate your debt with a personal loan
If you have too many debts, it means that you are making multiple payments on different dates of each month. This way of managing debt does not only makes it difficult to keep track of payment deadlines but also makes you lose a lot of money on interest.
Consider debt consolidation with a personal loan. Taking a low-interest personal loan for debt consolidation helps you to pay off all your debts and make a single payment each month to a single lender.
With careful planning and a disciplined approach, you’ll be able to reduce your loan burden without pinching your wallet. It’s going to be an arduous journey, but in the end, you’ll free from debt – and that’s worth the effort.
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that.
They always rely on him for advice on their investment choices, budgeting skills, personal financial matters, and when they want to get a loan.
He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at firstname.lastname@example.org.