The rising cost of living makes it difficult for the common man with his hard-earned salary to meet expenses at both the ends. Most of the people at times will apply for a loan for footing the bill of high expensive purchases it can be the purchase of property/house, buying car or vehicles, meeting out higher educational expenses, marriage expenses of children, purchase of gold, renovation of the house and the list goes on.
Making a loan is not a difficult task, but to repay the same is a tedious process as one needs to follow a disciplined set of rules and regulations to repay the loan in time. If the loan which has been borrowed is a lesser amount, then repayment can be done quickly, but if it is a big amount then the tenure for repayment will be quiet longer.
Hence there is a need for the borrower to chalk out a plan of action and stick to it firmly to ensure that the borrowed amount is paid in full to avoid the accumulation of interest which again will be a burden on the borrower.
Let's Check out the List of Mistakes to Avoid While Repaying Debt.
No Proper Planning
There is a need to have a proper plan and a strategy to repay the loan. Chalking out a plan will reduce half of the burden and thus you will be able to effectively quickly pay off the debt.
Apart from having a plan, the borrower should motivate themselves and should play an active role to ensure that they stick to the plan strongly (avoid deviation from the plan).
The borrower should chalk out a plan and figure out their financial situation and the amount of debt which is yet to be repaid by them. Understand as to how much of amount you can repay every month? Apart from salary, if you are getting income from some other source then try to use these funds judiciously to repay the debt.
Try to pay off the debt which has a higher interest rate on a high priority basis by repaying as much as you can and make at least minimum payments to other debts (if any). By doing so, you will be able to save a lot of amount in interest charges.
If you have borrowed a loan, then it is better to cut down expenses and garner as much as savings you can to repay the loan quickly. One should cut down unnecessary spending and try to manage their finances in an organized way to reach their desired goal of repaying debt within the stipulated time or even earlier.
All that the borrower has to do is to understand their spending pitfalls and make a conscious decision to make necessary changes as this will help you to save more money, in the long - run.
Applying for New Loan to Repay Old Debt
Debt is a vicious cycle, if one gets trapped into it, it will be really difficult to come out easily. One should avoid applying for a new loan to repay off their old debt. This act will reduce your credit score. Instead focus on repaying one loan which you have already made, with full dedication.
Some of the borrowers may be lured to go for a loan which is available at lower interest rates but in reality, it will be difficult to get a consolidation loan as you may have scored bad credit owing to missed debt payment in the past.
Making a new loan to repay the old ones does not bring down the overall loan amount which you owe to the lender. So, avoid it at all cost.
The advancement of banking systems has helped customers to do several banking transactions digitally instantly, without a need to visit the bank branch. The borrower should utilize the advanced technology and set an automation for equated monthly instalments (EMIs) of loan account from his/her salary account.
By doing so you will not miss any payments and can also avoid charges associated with it.