Thursday, December 6, 2012

The Best Ways to Manage your loan

You may have taken a loan for funding your education, or buying your first car or simply a credit card loan for Christmas shopping. While you've made good use of the loan amount, you must make sure you are committed to repaying it on time. Here are a few pointers on the best ways to manage your loan.

1. In Time
Make regular payments on time. You must organize your finances and take stock of the entire debt amount that you need to repay. Make a repayment schedule, and make payments before each due date. Also get a friend or mentor to ensure that you don't fall back on your debt payments.

2. Build a spreadsheet
Write down the different loans that you owe, alongwith debt amounts, interest rates, and how many payments you have done for each loan. Also calculate how much you need to save up in the next few months in order to meet upcoming payments. 

3. Contingency Fund
It would be advisable to build a contigency fund for loan repayments of 4 months, in case you switch jobs or find yourself with little cash due to sudden expenses. It will take time to build a contigency fund - using public transport, taking up a second job, or minimising expenses for a few months should build a good nest for you to bank upon in times of crisis.

4. Using Loans Responsibly
While education and car loans are important for building a career, and ensuring transportation to work and other activities respectively, travel/holiday loans and credit card purchases for expensive products that you cannot afford is not the prudent thing to do. Act responsibly and use loans that are the most important to you.

5. Consolidating Debt
If making a spreadsheet and following up on different repayment confuses you or previous loans were taken at expensive interest rates, loan consolidation could combine all your loans into one and increase your repayment period, therefore reducing your monthly repayments. This would not be an ideal situation to be in, but if it eases your financial problems, then go for it.

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