Loan repayment is one of the hardest things to do. If not planned properly there are good possibilities that it might create a lot of issues. The first thing that you need to plan while getting a loan is the ways of how you are going to repay them.
Unfortunately, there are a lot of people who are failing miserably in this particular issue. They get loans for some emergencies, but they are not able to pay them back properly. For these people, this article will be very useful. In this article, we will see some of the smart ways to repay loans.
Give priority to high-interest loans
If you are having many loans that need to be replayed at the same time, you need to give more importance to the loans that have the highest interest rate. It is because if you are extending the payment period, the amount that you need to pay as the interest will increase. At the end of the day, you will have to pay unnecessary amounts to the banks. This process is called as the avoiding debt avalanche.
Increase the repayment with income raise
If there is an instance where you have a rise in your regular income, consider yourself lucky. It is because it will make the loan repayment easier. Make it a point to increase the repayment that you have been paying earlier. This reduces the time that you are repaying the amount and at the same time reduces a considerable amount that you will be paying as the interest. If you are looking at the amount that goes out on a monthly basis, then it will look very negligible. But if you look at the bigger picture you are a reducing a considerable amount on the whole.
Use the investment to repay
There are possibilities that you might face some bad situation because of the loan. If you are feeling that you will not be able to pull off things, the best ways to set things right is by using your investments. Simple investments like life insurance can be of great help. You can actually borrow money against your PPF or life insurance to repay the loans. But make sure that you are doing this only in the toughest or the extreme situations.
Make lifestyle changes
This is one of the important things that will really have a significant impact on the loan repayment processes. More than anyone you know you’re spending capacity and what are the expenses that you need to face. So it is better to keep in mind everything while spending. For example, if you are a person who goes to the restaurant twice a week, you can cut it down to once a week. It will definitely make a huge change. This is a just one example, if you are doing the same in everything; it will have considerable impact and will help you in your loan repayment.