With the tides of modern society gushing in, the word ‘credit’ is no longer considered despicable. If you pick up any newspaper or magazine today, you would undoubtedly find headlines discussing the use and misuse of credit. In fact, credit is considered as a powerful metric that not only helps you manage your finances effectively but also plays a major role in realizing your future dreams and planning for the same.
It is totally normal for an individual to have several credit liabilities on him to fulfil some needs. The most common form of credit is a personal loan owing to its features. Therefore, knowing proper information about personal loan & how personal loan functions is necessary to fulfil one’s desires. A personal loan is taken from financial institutions to fulfil one’s personal needs or wishes on time and proves to be much helpful during financial crunches.
The fact that one has multiple personal loans or credit cards simultaneously is not folly but the mere occurrence of being able to manage them efficiently and effectively is very crucial. In order for things to move smoothly and fall in place, persistence and a little financial discipline is something that is imperative to have in yourselves.
Here are some simple yet important tips to follow diligently in order to manage multiple personal loans.
4 Tips to Master your personal loan management:
Create a budget
This is the foremost and also one of the most fundamental steps one must do before availing any kind of personal loan. Assessing your financial situation, whether income or debt, would always keep you aware of where your money is going and in what proportion. Simply creating categories and listing them down could give a clearer picture of the entire scenario, which could also be done through a number of applications available at app stores. Without preparing a budget at all, one puts himself in a vulnerable position unaware of financial status and the upper ceiling limit of the expenses.
Prioritize and target
Generally, people try to repay all their loans simultaneously without any strategy and eventually result in not a very happy ending. The smart move is to rank the personal loans according to the interest rates starting with the higher ones first. Once all the personal loans are repaid, one must focus on credit cards, if any. Otherwise, one would hamper his own credit score due to untimely payments to the bank which is a potential factor impacting future credit approval chances of the individual. Thus, creating a tailor-made-strategy as per the burden and target is the best way to go forward.
Avail a Top-Up or Consolidate debt
If you already have a loan approved in front of you and feel the need for another loan option, the safest idea would be to consider taking a top-up on the existing loan, because the more the number of loans, more would be the EMIs and subsequently, more the burden of repayment. One more option could be in exploring debt consolidation. Debt consolidation services are offered by financial institutions in the form of loans to club various debts and help customers manage their liability in the most optimum manner. This would help get all your focus on one loan and not get it divided between multiple horizons.
Other Sources of Income
Many people fail to see the other side of the coin. They only concentrate on reducing their expenditure but fail to explore the possibility of increasing the different sources of one’s earnings. It could be as simple as leasing out some space or working as a freelancer or even availing work-from-home opportunities in changing times. This would help reduce the burden and even help you be in a better financial position.
Other than these, setting reminders for due dates is necessary, which might sound trivial but when you are juggling between three or four different repayments of personal loans, it is quite normal for one to miss the due dates. Automatic reminders on phones or even auto-pay for the least amount can save you from being fined. Hence, timely payments are understated but should be an important priority.
Nevertheless, one must also clear his head of misconceptions, if any, regarding one’s personal loan. Technically, as long as the lender allows, you can have multiple loans as and when you qualify for it. There are not many laws putting a restriction on the number of personal loans one can avail and this is determined by the lenders as per their analysis of the applicant’s financial history and some other metrics.
One must always remember that each time a person takes a personal loan for himself, he not only increases the debt but also raises their debt-to-income ratio. The key here is to reach the financial goal without hurting the credit score or leading to a situation of unmanageable debt of hefty interest rates. These sheer skills of management could do wonders and prove out to be highly beneficial in turning your financial status for better. Also, when others will notice your effective management strategy, they would surely ask, What is the secret?