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If you want to find out how to manage your debts, this article will be helpful for you.
This article will explain to you the best 9 ways to manage all your debts properly. We all know how frustrating it can be when we cannot pay our bills on time. Luckily, today there are many ways to reduce your loan burden.
Managing your debt is an art. It is not as simple as getting the bills paid on time. If you want to live a peaceful life with your loans, then you will have to learn how to manage your loan properly.
Good Debt and Bad Debt
Is all loan evil and bad? To me, all loan are not bad, in fact, there is good debt and bad debt, both are loans but not equal and the same, and here is why.
Good debt is a loan that you take to buy a property or invest in a stock, cryptocurrencies, or a business with the aim of making a profit off your loan, though the profit is not guaranteed.
Bad debt is the loan you take to finance your day-to-day expenses or expenses that won’t improve your financial status like getting a loan for a vacation.
Having good debt is a smart financial move, as it helps you to grow your wealth by profiting off your loan. Bad debt on the other hand is there to drain your wealth.
The Best 9 ways on how to manage your debts
Here are the 9 important ways you can manage your loan successfully.
Know-How Much You Are Owing
In order to manage your debts as you should, you need to first know how many people you are owing, how much you are owing, the interest rate, and the due date of each of your loans.
This will help you see the bigger picture of all your debts at a glance. Knowing all your loan details is just like knowing all your problems, when you know your problem, the next thing is to find a solution.
So now how are we going to manage your loans?
Compare Your Income, Debts, and Expenses
Managing your loans is not rocket science. We all don’t want to be choked with our loans. Comparing your income with your loan and expenses is the second way on how to manage your debts.
You need to compare how much you are earning, how much you owe and the basic expenses that you need to finance every day and monthly. By doing this, you would be able to see if there is a chance to take off some money from your income for your loan repayment.
Make a Budget
The amount of loan you take depends upon your monthly income. Therefore, the next step you should always take for how to get out of debt is to make a budget and include all your important expenses like loan payment, house payment, medical expenses, etc.
This budget will help you to monitor your income, expenses, and debts repayment.
Prioritize your Debts
Make a list of all your loans and prioritize them. Now, while making this list, try to prioritize your loans according to their importance, the amounts, due date, and interest.
When you do this, it means that you will have to make payments every month to the creditors. that top your list But, if there are many priorities on this list, then you need a way to pay all your debts with high priority.
Thus, this way you can be sure that you will finish off paying off your loans.
Try and Consolidate Your Loans into One
You should try and consolidate your loans into one by reaching out to your creditors.
Consolidating your debts into one would help you avoid the charges that come with multiple loans and save you money. You would just need to pay back a loan and not deal with multiple loans.
Consolidating your loans would make it a lot easier to manage as you just need one repayment.
You need to check if consolidating your loans to one would really help you in decreasing your interest rates, charges, and other fees that you would need to pay if you are dealing with multiple debts.
Pay Your Loans on Time
Paying your loan late would leave a black mark on your credit report as it would show other creditors that you do not keep up with time for repayment.
When you pay your loan on time, it helps you avoid extra charges like late fees, late interest charges, and more. When you pay on time, it shows that you are committed and a good time manager.
Pay The Full Loan Amount
When repaying your loan, you have an option of paying the full amount that you are owing or pay the minimum amount, while you might think it is best to pay the minimum amount and spread the rest over the next weeks or months.
You should understand that the leftover of the loan would continue to attract interest, so if you can pay the full loan amounts, you should pay it and close the book.
Look For a Better Deal
A loan with high interests rate and charges is a very bad loan that could have you trapped in repaying the loan as it would affect the amount you need to pay back on the initial money you borrowed.
So before you take that loan, you should look around to see if there is a better deal for you.
Have a Backup Plan
You should have heard the popular saying that goes like this – Life and Uncertainty!
Many things could happen, your creditor could increase the interest charge or repayment terms, you could even have health issues that won’t allow you to walk, or get fired at work, and all these which could affect your income.
Having a backup plan like Emergency funds would help you during times of uncertainty and make sure you do not sink in more debts than you should.
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