Life is filled with unexpected expenses. Which is why almost everybody has taken out a loan at some point in their lives. Poor fund management is why almost 38% of Americans have some sort of debt. With new policies being released in 2018, and student loan debt mounting up…
Being vigilant with how you manage your loans has never been more important.
I personally have experienced both bad fund management (not something I want to reiterate) and great fund management where paying off the loan was a breeze.
Through this article, I plan to share 5 awesome tips to help you better manage your loans. From choosing which loans to pay off first, to dealing with those nasty interest creepers before they become a major clinch.
Let’s get into it.
Build A Budget – No Seriously This Is Important
Oh no… here we go again.
That’s probably the first thing that came through your mind when you read that sub-heading, right? I get it, budgets suck. Not only does it take valuable time. But it is almost impossible to stick to.
The point of a budget is to help you manage which direction your money is going. It’s not a solid stone structure of exactly where you should and should not spend your money.
The reason why I suggest first building a budget is because the more you earn, the more you spend. Which is why you really should keep track of how much you are paying to your loans monthly in correlation to other expenses.
Prioritize Your Payments
Here is where you will probably encounter tons of controversy. Some experts claim for your sanity it is better to pay off the smaller loans so that you feel a sense of achievement. But the problem is if you are doing this, you open yourself up to scope-creep from higher-interest loans.
Which is why we suggest the first thing you do is prioritize your loans according to the interest rate. Higher-interest rate loans will cost you far more in the long-run, which is why you want to deal with these straight from the get go.
Which means your budget should prioritize these higher-interest loans over any other expense.
Make One Extra Payment Per Year
How much do you spend on Starbucks a month? The average American tends to spend just about $3 a day for a cup of joe. Which works out to $1100 per year… yep, that’s right; just on coffee.
Now, imagine instead of spending that on coffee – you put that hard-earned money to your loan.
For example, your car loan may cost you roughly $300-400 per month. That means by sacrificing Starbucks, your getting almost 3-extra payments in a year.
Crazy how pennies add up over time right?
Don’t Be Scared To Refinance Your Loan
When you take out a loan, chances are you have a plan of action to pay it off before it becomes a risk. But life went ahead and threw a couple of stones, and before you knew it the financial weight was sitting firm on your shoulders.
The good news?
You are far from the only person to find themselves in this predicament. With climbing interest rates loans can really be a burden. Which is why refinancing your loan may actually be a fantastic opportunity for you.
Essentially, this is when a third-party comes in and buys your debt. Which gives you the power to negotiate your interest rate, and other payment terms. More often than not, this means lower interest, saving you time and money when it comes to getting that loan paid off.
When you are looking for a reliable refinance company to help you handle this, it is important to find a transparent company that you can trust. After all, you don’t want to make matters worse.
When getting a loan refinance, more often than not your credit record is scrutinized. After all, no company is going to buy dead debt. So you will need to have a semi-good credit record.
Round Up Payments (If You Can)
Okay, so this one can be a bit tricky. If your financial situation is still somewhat stable, but you really want to get a loan paid off so you can put your hard-earned cash to better use – why not round up on payments.
Let’s go back to car loans for example.
Say you are paying $373 per month. Why not round it up and just pay $400? Chances are you would of spent the extra $27 on something you don’t need anyhow!
Similar to the Starbucks story, by doing this you are making almost an extra payment per year, which will help you knock the loan off just that much quicker.