Take These Practical Steps To Stay on Track With Your Loan Repayment Plan
Loans seem like the go-to option when you are in dire need of money and need a quick way out of the cash crunch. But the blessing remains only until the repayment installments start to eat into your monthly income. Be it something like no credit check loans, or one with a higher interest rate and many criteria to fulfil, loan repayment is serious business.
Suddenly, the late nights of partying, your exorbitantly priced SUV, and exotic vacations start holding a hint of guilt within themselves. Basic monthly budgeting ends up leaving a bitter taste in your mouth, and whatnot.
The line between successful loan repayment and faulty financial plans is often blurred out by personal gains. Desires and impulses get the better of you, and soon, you’re left scrambling for loose cash.
But then, how to ensure that loan repayment will eventually not turn out to be a dreadful process? And that your financial goals and aspirations won’t get knocked off the shelves once the period of repayment builds steam?
Let’s skim through some basic and pragmatic steps that you can incorporate in your daily lifestyle and planning, in order to make sure that your loan repayment never gets derailed.
#1. Always Pay More Than the Bare Minimum
And this advice applies to all kinds of debt, like credit cards, overdrafts, or line of credit. When it comes to paying back your loans, never settle for the minimum payable amount for each month. The extra amount need not be huge, but the more pressing issue is that it shouldn’t be non-existent.
Believe it or not, paying minimums over an extended period of time will lose you more money than what you think you’re saving by doing otherwise. The logic is simple. If you’re paying interest on the remaining loan amount, the quicker that number decreases, the earlier you get done with this process.
Moreover, this gives you some much-needed margin of air to breathe. For months when money is hard to come by, you can always fall back on the minimum repayment plan. However, if you’re already on that track, there’s a high chance that you might fall short whenever adversity hits.
#2. Pay in Cash and Dump Credit Cards
The fact that people spend more when using credit cards than when using cash is backed by statistics from across the planet. As strange as it might seem at first glance, it makes perfect sense when viewed from a psychological standpoint.
In all actuality, people tend to think of cold hard cash as holding more monetary value, than just numbers ticked off their credit streams. Moreover, the notion that credit cards provide quick revenue whenever and wherever you need it, with no urgency for immediate repayment, is one of the worst things causing financial havoc.
All the budgetary markers direct us to use cash as much as possible so that we remain cognizant of the money that has left our pockets in reality at all times.
#3. Make Well-Planned Lifestyle Changes
Saving a small amount every day through minor habitual changes can add up to become a considerable sum in no time. The only thing that stops people from implementing this rudimentary practice is lack of consistency. And unfortunately, Self-discipline evades people in the face of bankruptcy.
However, people who manage to make some trivial lifestyle adjustments to accommodate their loan repayments, escape the debt trap in effortless fashion. Cutting down on luxuries and unwanted spending will also ensure that you have enough money to pay higher EMIs, if and when needed.
Do not overdo the cost-cutting aspect. If not taken care of, it will eventually backfire and brew inner hate against the restrictions that have been put in place. This often leads to unprecedented outbursts on certain occasions, that might burn all your planned savings in the blink of an eye.
And lastly, make it a point to avoid routine lifestyle upgrades during the loan repayment phase and continue with the status quo.
#4. Hustle Harder & Generate Extra Cash
Getting a second job, or consistently picking up an extra shift or two, is something that is not possible for everyone to pull off, due to myriads of reasons. But it is one the quickest ways to fly you out of the debt trap, should you choose to travel this path.
All the extra income should be channelled towards paying your outstanding loans. And most importantly, this does not have to be a permanent hassle. Once you think a large chunk has been repaid, the order can be restored, and life can proceed as usual.
Your side gig can be an extension of your pre-existing day job or a means of making extra cash through a hobby. At the end of the day, pick your poison and get to work.
For people who find it hard to juggle between multiple jobs, they can generate petty cash by renting out their basement, storage space or a room in their house.
Also Read: Effective Liquidity Management and Smooth Cash Flow for Small Businesses
Conclusion
Repaying loans on or before time is a fulfilling feeling like no other. It means you have responsibly laid down a solid foundation for your other financial goals, and secured your future in the process. It also allows you to make smarter choices by choosing an interest free loan in the future to lessen the burden.
In fact, financial stability is a gift that keeps giving. There is a reason why people chase strong measures to curb their expenses and save up money.
It gives them a strong sense of control over a future that they haven’t yet witnessed. But then again, it is not as easy as it usually sounds.
All the techniques that aid successful and smooth loan repayment are backed by one common mindset. The mentality to put everything else on the back burner and focus entirely on reducing your debt.
This is basically what should drive you to take action and make insightful changes that prevent faulty loan repayment. If you’re truly determined to be debt-free, your subconscious will guide you to take steps that would be necessary for you to reach that goal.
There is no standard guide to leading the perfect life. It is only how we figure out and handle the curveballs that life throws at us, what matters the most.