The next stage is to learn how to correctly use loans and select lending institutions so that the borrowed cash assists you rather than leave you in debt.
On Financer, you’ll find loan comparisons, credit institution pages with objective benefits and drawbacks, and reviews from real consumers of MFI services.
Make a complete list of your debts
From mortgages and vehicle loans to borrowing money from friends and family to get by “till payday.” All cards, installments, and so on. It should be a table (in excel or at the very least on paper) with the following parameters for each debt:
- to whom and for what you owe
- how much you owe (“body” of the loan)
- real effective loan rate
- minimum monthly payment
- planned payments (this column will remain empty at; first, you will fill it out later)
After that, you should list everything you need to say. You should not be terrified of the number, no matter what it is. The important thing is that you’ve already taken the first step: you’ve examined the problem.
Start by paying off small debts
Sort the table by bet size, starting with the largest and the smallest. It would help to prioritize smaller obligations among debts with similar interest rates.
Prioritizing less debt has a psychological meaning: when you realize that your efforts yield tangible benefits in the shape of a reduction in the number of loans, you will be motivated to keep going.
Furthermore, working with fewer different loans is more accessible.
Refinance
Refinance part of the debt if possible. It isn’t easy to achieve, especially for persons who have previously struggled with loan repayments. Therefore, this item is only for those who are fortunate enough to be able to do it.
In certain circumstances, banks give a little more than the amount needed for refinancing; if you get extra money, put it toward paying off modest obligations (at the top of the sorted table).
Find your maximum
- Calculate the maximum monthly payment you can make toward your debts and enter it as the projected total payment amount in the table.
- Other cost-cutting measures are only meant to be temporary.
- Seek help and inform your loved ones about your circumstance.
- More fun together – progress is aided by saving with friends.
- Examine your expenses and eliminate any that aren’t required.
- It would help if you had enjoyable days for yourself not to give up; there are numerous free ways to spend time with family and friends.
Plan your payouts
Fill in the “scheduled payments” column in the table you’ve created from the bottom up. Set a sum equal to the minimum payment for all loans except the top one. After completing the rest of the table, use whatever money is leftover from the projected repayment amount for the highest loan.
This payment distribution will enable you to eliminate your most “expensive” debts over time and lower the average rate of your total debt.
Automate payments
Set up automatic payments for each loan in your Internet bank several months in advance. Indicate at least 3-4 days of stock as a payment date, rather than the latest feasible day.
If you can make all or part of the payments on a single day, do so. It is preferable that this day is near the regular date of receipt of revenue (for example, salary), but not too close, as the salary may be delayed by a few days, disrupting debt payment.
Set up transaction messages to be delivered to your phone and email.
Don’t be afraid of debt
Not every debt is wrong, and not every debt can or should be paid off as soon as possible. Limiting yourself to anything is not a good idea. Let’s pretend that a reasonable-rate mortgage is a standard tool with which you can live for 15-20 years without losing money. It doesn’t make sense to deprive yourself of all joys for a few years to reduce your mortgage term by 3-4 years.
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