- The Savvy Promise
A personal loan can act as a financial boost to help your purchase various items and also pay off debt that you may have. However, it is possible to bite off more than you can chew and end up falling into a debt trap with something that was supposed to help you. These four essential tips can help you make your way to better managing your personal loan debt. Here is what you need to know.
Assess how you have accumulated the debt
In order to fix a problem, you have to assess the source of what caused it. If you are feeling overwhelmed by your personal loan debt, taking a step back and assessing your finances can help you see where money is coming in and where it is going out. Knowing how much debt you owe and to whom can help reduce your level of stress and make it easier when creating a plan on how to pay it off. Keeping an up to date lists of when payments are due can prevent you from defaulting on further payments.
Pay what you can
No one wants the debt monkey pounding at their back. Paying off your personal loan debt by making more than the minimum requirement can be ideal, but it is not always possible. What you can do is ensure that you pay off the minimum repayment to stop your debt from growing. Creating a budget can also help you cut back in areas where you are spending too much on. You can then use whatever finances are left over to help you save towards paying off your personal loan debt. Ensure that the payments that you are making are helping you reduce the interest owed.
You could consider consolidating your debt
You can consider taking out another loan to cover the debt that is owed on your personal loan. This is also known as debt consolidation. Debt consolidation helps you combine multiple debts that you may have into a single loan term that comes with a lower interest rate to help you manage your repayments. However, it is important to note that debt consolidation is not a quick fix and will not be effective if you have not changed the way you manage your finances or have no budget set in place. You can use a debt consolidating calculator to see if this the best option for you.
Compare, compare, compare
The last thing that you will want is to choose an option out of pressure or in a rushed state and end up in more financial woe than before. When comparing finance options that can make it easier for you to ease your way out of your personal loan debt consider things such as:
- Affordability. Does it work with your current financial circumstance? Are there any fees or charges that you may have to pay? Will a longer or shorter term be suitable for you?
- Interest rate. Will you be able to afford the interest rate of the loan, especially if it were to rise by 1%?
- Penalty fees. Will your loan allow you to pay off the loan early and are there any exit fees that can affect how you pay off your loan?
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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.
The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.
Approval for personal loans is always subject to our lender’s terms, conditions and qualification criteria. Lenders will undertake a credit check in line with responsible lending obligations to help determine whether you’re in a position to take on the loan you’re applying for.
The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well as others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.