Taking a loan against all appearances is not that difficult. The stairs start only when it is necessary to pay off the debt. How is it easier to do it and not lower the standard of living significantly?
Loan repayment – a huge challenge regardless of the budget
We never take credit for a reason. Someone who decides to take such a step has good reasons. Usually, it is about large investments – buying an apartment, building a house, a new car or opening a business.
Each of these steps requires a huge amount of money to be available, and despite the constantly improving financial situation of Poles, hardly anyone can afford to collect the amount of money needed for such expenses in a short time.
Although the loan amount, including all costs, is divided into installments, you need to prepare a minimum of a few hundred dollars in your household budget, and often even two or three thousand dollars (in the case of very high loans or short repayment terms).
The consolidation loan will reduce the amount of liabilities
The first solution that should be used to facilitate the repayment of the loan is to reduce its amount, but this is only possible if you have at least two loans or a loan and a loan or installments for equipment. In this situation, you can use a consolidation loan.
A consolidation loan is a loan that combines two or more monetary obligations. Such a loan can be taken both when two liabilities are in the same bank and when each one is in a different bank. You can apply for consolidation loans both in the banks with debt and in a completely different bank by simply transferring your loans to it.
This solution pays off for both the borrower and the bank that provides the consolidation loan. By combining liabilities into one with a lower installment, the borrower can pay less, while the bank granting the consolidation loan can take over the customer of another bank. Installments are reduced in a sense in “thank you” for transferring their obligations to the new bank.
But what if you only have one loan, so there is nothing to consolidate with? Is it necessary to tighten the belt then to pay off debt easier and faster?
Proven ways to make repayments easier
The method of paying off the loan really depends on its amount and your earnings and future views. If you want to pay the lowest installment, you will have to spread the loan over the longest possible time. In turn, if you want to deal with repayment faster, you will have to reckon with the fact that you will have to pay a higher installment.
However, there are several ways to make repayment easier.
- First of all, pay the loan first – before any other expenses. Set up a standing order on your bank account so that you never forget to settle your loan installment. Never go shopping before you pay the current installment. You may find that you spend so much that you won’t have enough for this month’s installment. From the very beginning, learn the responsibilities in this area.
- If you can, overpay the loan. Everyone has better and worse times when it comes to finances. In these better times, overpay your credit with surpluses and you will lower its final costs. If you can afford to pay two installments in a given month instead of one, do it. Earlier, however, find out if you can overpay the loan and pay it back faster without any consequences, i.e. whether this option is not additionally paid.
- If your consolidation (or other) loan was covered by insurance, and you decide to pay it back earlier, submit a request to the bank for a refund of the premium for the unused period of protection. This step allows you to enter in the Civil Code.
- If you have obligations that you cannot or do not want to combine, as well as credit cards with debt, then start by paying off the smallest liabilities. You will quickly see the effects and get rid of further debts, which will allow you to look optimistically at your finances.
- Save all your expenses and you’ll find out where your money is “escaping”. Already after 3 months, you will be able to figure out what you spend too much money on and possibly modify the way you spend, e.g. start shopping in another store, change your mobile operator or unsubscribe from subscriptions of magazines that you don’t read anyway.
Learn more about personal finances on Good Finance. Compare consolidation and cash loans, find the best deposit and see how to save money.