There are sometimes certain situations in life when you have no other option than to opt for a loan. For example, a sudden hospitalization of a family member or college admission fee of your daughter. But taking a loan is not the problem since there are a number of institutions and organizations that would happily lend you money for any purpose. The problem is repaying the loan in time that creates an issue.
If you are able to manage your personal finances well and repay the loan on time, then again there would be no problem at all. But if you cannot manage your personal finances to repay your loan on time, you would have to face the consequences. The very first consequence would be facing the debt collection agencies and then dealing with your credit rating report.
One of the most effective ways to manage your loans is by managing your finances. There are a number of ways to do it. Here they are:
Save More Money
To avoid falling into this trap of loan, the first thing that you can do is save. Keeping track of your spending is really very important. Take a look at your credit card statements and bank statement for a couple of times .Every month make it a point to save, even if it is a meagre amount.
Save on petrol consumption, save on bills, save on grocery shopping and so on. And this bit by bit saving on small things would ensure that you have quite an amount of saving at the end of the month. Thus saving like this would help you in two ways, firstly you might not have to take a loan ever if you can combat a financial crisis with your own saved money.
Hence you see saving is a part of good personal financial planning that would not only prove to be a cushion when you are faced with a financial crunch but is also kind of a security against any odd situations.
Talk to the Money Lenders
But even after giving up all your savings, you cannot repay a loan do not worry as there are other ways too. The first thing you should do once you feel you will not be able to repay a loan is to be honest with your lender and discuss about your situation openly. If time is all you need to repay your loan then ask for it.
It is important to face your problems up front rather ran run away from it. Running away from the debt will only lead to stress and anxiety. You will be surprised at how flexible the money lenders can be if you try harder. It is better to come up with an effective plan than hide.
Consider Loan Consolidation
But if you think you will not be able to repay your loan even if you are given extra time then you can go for loan consolidation, if you have more than one loan to repay. By going for loan consolidation you would probably end up paying more money in the long run since the interest would be more but presently the amount of money you need to repay would decrease considerably. Hence plan your loans like you plan your personal finances.
Check You’re Spending
One of the most effective ways to manage your finances is to check your spending habits. Make a list of spending and see where the unnecessary spending is occurring. By cutting down unnecessary expenditure, you can increase your saving and improve your financial health. Reduce the number of coffees you drink or number of times you eat out. Make sure you use the exiting cosmetic products before you buy the new one and the same goes for the clothes and other things as well.
You can create a spreadsheet to track your expenses. It’s easier and convenient. You can easily calculate how much you are spending on what items.
Use your credit cards wisely
Credit card debts are one of the most common types of debts that people have. When you are trying to pay off your loans, it is important to keep your other debt like credit cards bills minimal. Try to pay with cash and withhold using your credit cards for the time being. Credit card bills can easily go out of hand if you are not careful. Use them only you don’t have any other options. Be as frugal s you can. This is an important step towards an effective personal financial management.
By managing your personal finances you can easily manage your loans and pay them off as soon as possible. By making a few adjustments you can easily save more, reduce expenses and manage your loans and be free of any financial burden. Make sure to use different methods for saving more money.