We – my wife and I – have a personal loan, two car loans, and four credit cards, and the repayment is eating all our income. Can you give us some suggestions on how to pay off strategically?
AIndeed, it’s always best to plan your finances in such a way that you can get rid of liabilities faster and can save money on interest rates.
There are a few financial regimes which can help in settling the debt faster, but it is more important to understand how you need to settle it without any extra forfeits.
I would recommend you make a list of liabilities from the biggest to smallest or vice-versa in terms of outstanding balances.
Consider the amount of interest rate you pay on each debt, as credit cards generally have higher interest rates compared to personal or car loans.
Rank whichever you consider can be settled easily or which is more important.
Then move towards the monthly financial plan and figure out which expenses can be cut to pull out some extra money.
Give priority to necessity and slash your entire unwanted list. This will help to balance the financial structure in the long-term.
Use that extra money in paying off the priority loan. But continue the standard instalments and minimum due amount on your cards to avoid any late payment charges.
Debt consolidation can also be the option, but make a proper study before entering into any new debt. Check the monthly cash flow and read carefully the fine print on early repayment terms on existing loans before signing up to a new liability.
But here I would like to emphasise that restructuring the debt might be distressing but could ease if you close a few higher interest payment liabilities compared to the lower ones. This will leave you in a position to monitor debts in a smart way.
To pay off the debt faster you need to have stringent discipline in financial management. A clear objective and tactical approach will make the process smooth.