Do you have that one friend you admire because of her financial prudence? She never seems to be in debt and manages to pay her bills on time.
Some people refer to her as frugal or stingy, but you know better. You will never find her spending money for the sake of it.
She runs her life on a budget and manages to save a portion of her income every single month. The reason why you admire her so much is that you wish it were you.
Life as you know it is living from paycheck to paycheck. Sometimes it is a struggle meeting all your expenses. You resort to taking personal loans and borrowing to keep up.
If this describes you in any way, please read on. We will share some ways to repay personal loans faster. In the end, you will learn how to live in moderation based on your income.
1. Take Stock of Your Finances
When was the last time you took a long hard look at your expenditure? Are you more inclined to spend without thinking? You enter a supermarket and leave with more than you need.
There seems to be a certain allure to buying things because you can. Even when you don’t have the money, your credit card provides a quick solution.
Well, now it is time to be mindful of your spending with a little introspection and soul searching. Write down your expenditure, right to the nitty-gritty. Here is an idea, have two columns. Label them A and B.
Column A should contain the must-haves. These include utilities, grocery shopping, savings, and debt repayments.
The other column should be on the things you can do without. Add things like night outs, fancy dining, happy hour, and salon trips. By now, it should be pretty clear that a huge chunk of your money goes to the second column.
Now, take another piece of paper and list down all your debts. Yes, that includes that loan from your parents. Clarity on what you owe can be the boost you need to start paying.
2. Come Up With a Repayment Plan
Consider a repayment plan that works for you. You can try out the following:
- Increase the number of payments with biweekly instead of monthly payments. The benefits of doing this are many. More payments mean less interest accrues on the balance. You can shorten the loan repayment quite significantly with this approach.
- Allocate some extra amount to the minimum balance. If you have to pay $100 every month, increase it to $150. Like in the case above, you will pay off the debt much faster. And there is the added benefit of less interest in the long run.
- If you come across extra cash, make an extra payment to the loan. Let’s say you get a tax refund of $150. Instead of treating yourself to a shopping spree, pay the personal loan. In that way, instead of making 12 monthly payments in that year, you will have made 13. Again, the benefit is the shortening of the loan period.
- Get a side hustle for some extra cash. Put all these towards settling your personal loans.
Keep track of your debt paydown using resources like those available on Chunk Finance. The platform creates custom approaches based on your unique financial situation. You also get tips on how to minimize interest, debt repayment strategies, and so much more.
3. Renegotiate Loan Terms
What you may not know is you can renegotiate your loan terms. But, this depends on several factors. One is the prevailing interest rates. If it is lower than when you borrowed, the lender may pass on the benefits to you.
The second factor is your repayment history. You see, lenders want their money back. A good track record of repayment shows you may be worth the risk.
You also get the added advantage of improving your credit score. This is something lenders take due note of in determining your credit line.
Bring your negotiation skills to the table and see if you can renegotiate the interest rates.
4. Consider Debt Consolidation
Debt consolidation works well if you have many loans to take care of. What it entails is combining all your loans into a single one. It provides an effective way of how to pay off credit card debt fast.
The main advantage is the right lender can offer low-interest rates. It will of course depend on your credit score.
Managing all your debts as one will also make it easier for you. You don’t have to keep up with remembering to make the different payments.
5. Avoid Penalties on Late or Missed Payments
The effects of missing or delaying payments are many. Some lenders will penalize you and increase your debt. If they report you to the reference bureaus, it will impact your credit score.
Signs of financial prudence mean keeping up with monthly repayments. We go back to point one above. Remember, we advised that debt repayment should fall in column A.
So, what is the big deal about credit scores? Well, you will know how important strong credit scores are when seeking financing.
Lenders can give you loans even with a poor credit score. But, get ready for a much higher interest rate. They do, after all, have to protect themselves against your inability to pay.
And, that’s not all. You can lose out on job opportunities or even apartments with poor credit scores. Think about this next time you opt to buy a new outfit instead of repaying a debt.
Final Thoughts
Life comes with surprises and challenges. You may find yourself in a cash crunch that mandates you to take a personal loan. That, in itself, is not a bad decision when looking for financing. The problem arises if you do not keep up with the repayments.
And, there are ways you can repay personal loans faster. We have shared some workable solutions in our article. Start getting rid of debt by taking stock of your finances.
Bring your spending under control with a budget. Your expenditure should never be above your income. Also, try out some of the strategies we have shared. The aim is to shorten the repayment period and reduce the interest rates.
Very soon, you could be that financially prudent person others admire. Good luck getting out of debt fast.
