Applying for a loan is one thing. Getting approved and paying for that loan is another story, especially if you have several under your belt. Although getting a loan can help augment certain finances, you need to make sure that you can pay off those loans as soon as possible and start saving up for the rainy days.
The question is how.
Here are tips on how to easily repay your loans and get back to saving as soon as you can:
Tip No. 1: Know how much you owe.
This is the first thing you need to do if you want to get out of debt. List down all of your debts, including the amount, interest rate, monthly amortization, and due date for each loan. This way, you can easily see which loan you should prioritize.
Tip: There are two options when paying off a debt. You can go for the loan with the highest interest rate OR start paying off the smallest loan amount to make it easier for you to reduce the number of debts you have.
Tip No. 2: Try negotiating with your creditors.
Let’s say you have multiple loans with almost similar interest rate. What you can do is to go to your lender and request for a possible consolidation of loan. By doing so, you will be able to reduce your loan to one with one interest rate and due dat.
Consequently, you can negotiate changes in your interest rate to lower your monthly amortization. When you do this, back this request with sufficient amount of savings and a good credit score to make it easier for the lender to approve it.
Tip No. 3: Allocate a bigger amount for “Loan Repayment” in your budget.
Budgeting is crucial in every OFW’s money-saving strategy. This is also why we stress the importance of keeping it flexible to make sure you can accommodate sudden expenses such as loan repayment.
What should give way to accommodate additional funds for repayment of your loan? Start with negotiable expenses such as shopping or eating out. Simple lifestyle changes can make a difference in your budget. If you allocated a specific amount for savings (and we assume that you have), reduce the amount first so you can pay off existing debts.
Avoid shouldering the expenses of your relatives or giving in to their demands. You’re working hard for that money. Don’t just give it away as if you are an ATM machine.
Tip No. 4: Don’t fall for easy cash schemes.
It’s tempting to sign up for those schemes that promise “instant cash” or “double your money after five days.” Not only you are wasting your time but also increasing the possibility of losing that money dedicated specifically for loan repayment. You are so much wiser than that.
Tip No. 5: Be wise on your spending.
Remittance will always be part of your budget (and so does loan repayment). If you have extra cash left, make sure you spend that money wisely.
There are variety of options. Aside from letting go of wants, you can start a micro-business for additional income, wherein the fruits of which can be used to pay off your loans. You can also invest your money through different investment products to help it grow.
Once you are able to pay off your debts, you can now start the saving process. After all, you’ll never know what will happen in the future, so it’s better to be prepared.